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Rand drops as dollar rises after Fed hawkish minutes

The South African Rand fell On Thursday, battling against a stronger dollar after meeting minutes showed the US Federal Reserve was preparing to act aggressively to stave off inflation.

At 8:49 p.m., the rand was trading around 2 p.m.7397 against the dollar, 0.46% lower than its previous close.

Many Fed officials said they were prepared to raise interest rates in half-percentage-point increments at upcoming policy meetings to rein in inflation, according to minutes released Wednesday.

Fed’s hawkish comments tend to weigh on the rand, because higher rates in developed markets are draining capital from higher yielding but riskier emerging markets like South Africa.

“The rand has weakened…both on the Fed’s hawkish tone, highlighted particularly in the minutes, and on the recent easing in a number of commodity prices, including coal, the main export raw materials from South Africa,” Annabel Bishop of Investec said in a note.

“A faster U.S. interest rate hike cycle than in South Africa will be a particular cause of rand weakness, and the rand has also weakened on this concern.”

SHares on the Johannesburg Stock Exchange fell for the fourth day in a row as investors battled uncertainty over the impact of the Russia-Ukraine crisis on commodities amid an absence of local growth triggers.

This local and global uncertainty has pushed the market into a “choppy zone” and confused investors, said Greg Davies, head of wealth at Cratos Capital, leading to days of “mini bull markets”. or a continuous but gradual fall.

“The situation in Ukraine oscillates between a possible peace and more aggression almost every hour… And also locally it is difficult to choose a theme,” he said.

The benchmark all-stock index fell 0.47% to 74,008 points and the blue-chip index of the top 40 companies ended down 0.45% to 67,003 points.

In fixed income, the yield on the benchmark 2030 government bond fell 4 basis points to 9.555%.