South African rand starts week on back foot on China, Fed worries

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South African rand starts week on back foot on China, Fed worries

9:54 CAT | 14 Aug 2023

File photo: Reuters

The South African rand was under pressure in early trade on Monday, hampered at the start of the week by worries over the health of China’s economy and the potential for another U.S. interest rate hike.

At 0635 GMT, the rand was at 19.01 to the dollar ZAR=D3, about 0.2% weaker than its closing level on Friday.

Rand Merchant Bank said in a morning briefing that the risks were for the rand to fall further, citing weak economic data out of China and no signs of stimulus, coupled with higher-than-expected core producer inflation in the U.S. and increased bets on another Federal Reserve rate hike in September.

ETM Analytics played down the market-moving potential of this week’s South African data releases, which include second-quarter unemployment data ZAUNR=ECI on Tuesday and June retail sales ZARET=ECI on Wednesday.

“South Africa’s economy remains under considerable pressure and still holds a high-risk premium which must be accounted for. As U.S. bond yields rise, the rand will remain vulnerable,” it said in a research note, adding that this week’s U.S. releases, including Federal Reserve minutes, were likely to be more market-moving.

South Africa’s benchmark 2030 government bond ZAR2030= was weaker in early deals, the yield up 4.5 basis points to 10.210%.

Source: Reuters