Rand weakens against the US dollar as commodity prices ease

The rand weakened on Monday as the rally in commodity prices eased, with markets also bracing for rate hikes in the United States and the UK. Picture: Steve Buissinne/Pixabay

The rand weakened on Monday as the rally in commodity prices eased, with markets also bracing for rate hikes in the United States and the UK. Picture: Steve Buissinne/Pixabay

Published Mar 14, 2022

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The rand weakened on Monday as the rally in commodity prices eased, with markets also bracing for rate hikes in the United States and the UK.

Even though the South African currency is considered a riskier asset, it has gained favour in recent days as higher prices of gold, palladium and coal boosted prospects of stronger export income for the commodity-rich country.

At 0610 GMT, the rand traded at 15.0800 against the dollar, 0.43 percent weaker than its previous close.

Gold prices fell on Monday as US rate-hike expectations lifted Treasury yields to their highest in a month, while hopes of progress in Russia-Ukraine peace talks further assuaged bullion's safe-haven appeal. Palladium and platinum also dropped.

Nedbank analysts said the foreign exchange markets remained at the mercy of developments in Ukraine, but the focus this week was also on Federal Open Market Committee (FOMC) meeting.

The US central bank's FOMC meeting is all but certain to begin hiking interest rates from their pandemic lows, with investors also watching projections for the frequency and size of future rate increases.

The Bank of England is expected to lift its rates to 0.75 percent on Thursday, the third rise in a row, and to signal more with the market pricing an aggressive 2 percent by the year-end.

Higher rates in developed markets often drain capital away from riskier emerging markets such as South Africa, affecting their currencies.

In fixed income, the yield on the benchmark 2030 government bond added 2 basis points to 9.76 percent in early deals, reflecting weaker prices.

REUTERS