The South African rand strengthened on Tuesday as the dollar consolidated its gains near a two-decade high amid fears that aggressive interest rate hikes by the Federal Reserve could propel the economy America in recession.
As of 5:59 p.m., the rand was trading at 16.0525 against the dollar, 0.48% higher than its previous close.
The dollar index, which measures the greenback against a basket of six major peers, rose about 0.2% to 105.39.
BNP Paribas chief economist Jeff Schultz said in a note that the Reserve Bank of South Africa is expected to maintain a 50 basis point rate of hike for its three remaining meetings in 2022, followed by a final hike of 25 basis points in January 2023.
“We also don’t rule out a 75bp hike in July or September in the event of more acute ZAR weakness,” Schultz added.
In the stock market, local indexes fell more than 1% as investors continued to worry about an aggressive rate hike from the Federal Reserve on Wednesday. The broader all-stock index slipped to an eight-month low.
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Telkom led the fall, down 9.5% after the majority state operator reported free cash flow below expectations and cut its medium-term revenue and profit forecast.
Peter Takaendsa, head of equities at Mergence Investment Managers, said the market was disappointed with Telkom’s cash generation, which missed the company’s forecast.
The government’s 2030 benchmark bond was flat at 10.390%.