Rand slightly weaker as dollar strengthens

The rand is slightly weaker, as the dollar strengthened amid expectations for several US Federal Reserve interest rate hikes this year.

Concerns over SA’s economic outlook persist due to its fiscal, political, and structural shortcomings, as well as uncertainty around the COVID-19 pandemic.

Investors anticipate that the South African Reserve Bank will raise rates for the second meeting in a row at its first monetary policy decision of the year later in January.

“We expect inflation to rise higher at 5.7 % from 5.5% in November, which will push the inflation rate for the year as a whole to 4.5 % although 4.5 % is right in the middle of the Reserves Bank 3 to 6 % target range. The Reserve Bank is more concerned about the inflation outlook and the monthly inflation rates. The Reserve Bank is likely to increase interest rates further when it meets next week,” said Nedbank Economist Isaac Meshego.

In the video below Mashego said the interest rate hike is expected as a result of the rising fuel price:

The central bank increased the repurchase rate by 25 basis points to 3.75% in November for the first time since March 2020.

The rand is currently trading at R15.46 to the US dollar.