South African rand pares losses before Powell speech

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South African rand pares losses before Powell speech

3:16 CAT | 25 Aug 2023

File photo: Reuters

The South African rand pared some losses on Friday, on improved market sentiment during the European session, ahead of a speech by the U.S. Federal Reserve Chair that could set the tone for future interest rate hikes in the world’s biggest economy.

At 1150 GMT, the rand traded at 18.6475 against the dollar ZAR=D3, about 0.9% stronger than its previous close. The rand has had a turbulent week, contributing to its over 4% losses month-to-date.

The dollar =USD was little changed against a basket of global currencies.

On Friday, Jerome Powell will give a speech at the Jackson Hole Symposium for global central bankers. The market is bracing for a hawkish tone from Powell, which could point to further U.S. rate hikes.

“Given how high U.S. Treasury yields have risen in recent weeks, the risk is that Powell’s comments are interpreted by the market as dovish, even if he tries to maintain a balanced or even slightly cautious tone,” Danny Greeff of ETM Analytics told Reuters.

The risk-sensitive rand often takes cues from global factors like U.S. monetary policy in the absence of domestic economic data cues.

“The (rand) will trade at the mercy of Jackson Hole-generated headlines into the weekend,” Greeff added.

South Africa’s benchmark 2030 government bond ZAR2030= was weaker, with the yield up 2 basis points at 10.220%.

On the Johannesburg Stock Exchange, the blue-chip Top 40 index .JTPOI last traded around 0.3% higher from its Thursday close.

Source: Reuters