S’African rand weakens in early trade

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South Africa’s rand weakened early on Tuesday, despite the U.S. dollar’s slide after an overnight rally.

At 0655 GMT, the rand ZAR=D3 traded at 17.3400 against the dollar, 0.16% weaker than its previous close.

The South African currency had slipped on Monday, as market sentiment was dented by worries about a rise in COVID-19 cases in China and tightening restrictions in some cities of the world’s second-biggest economy.

ETM Analytics said in a research note that the spotlight has now shifted from China’s lockdowns back to speculation around prospective U.S. monetary policymaking.

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“Comments from two Fed (Federal Reserve) officials yesterday reinforced expectations for a downshift in the pace of rate hikes,” it added.

Cleveland Fed President Loretta Mester said on Monday that the central bank can downshift to smaller interest rate hike increments from next month, while San Francisco Fed President Mary Daly said the real-world impact of interest rate hikes is likely greater than what its short-term rate target implied.

The government’s benchmark 2030 bond ZAR2030= was stronger in early deals, with the yield down 5 basis points to 10.345%.

Reuters