Markets are finding firmer footing as greater clarity around the US Federal Reserve’s interest rate path boosts investor confidence.
The picture for the rand is slightly more challenging, however, as higher US interest rates support the dollar and could potentially weigh on emerging market currencies.
The local unit is currently trading at R16,26 to the US dollar, holding relatively steady ahead of the South African Reserve Bank’s Monetary Policy Committee interest rate decision on Wednesday.
Portfolio Manager at Rand Swiss Viv Govender explains.
“We also are seeing an uptick in the situation in Russia, where there’s been massive attacks by Ukrainians on Russian oil infrastructure, as well as other infrastructure, and the Russians produced I think about 10% of the world’s diesel production. So, all those factors put together has increased uncertainty in the world and also strengthened the US dollar I think that’s what we are seeing at the moment. It’s not just a case of rand weakness it’s a case of dollar strength for multiple reasons.”
Meanwhile, economists and market observers expect the Reserve Bank to raise interest rates by 25 basis points this week.
Due to the Heritage Day holiday on Thursday, the SARB’s Monetary Policy Committee will announce its decision on rates on Wednesday.
