The rand is bleeding as the dollar continues to decline

The South African rand lags behind the dollar, which continues to strengthen amid concerns about slowing global economic growth, rising interest rates and the risks of war, which lead to greater market volatility.

The dollar has strengthened against all of its major counterparts as China’s Covid lockdowns, accelerating inflation, and worsening global growth outlook have increased demand for the currency as a safe haven, Bloomberg reported.

“Rising inflation, the war in Ukraine and tougher lockdowns to Covid-19 in Beijing and Shanghai have left investors uncertain on many points, but they are confident that US interest rates are rising and the dollar is following. “Reuters said. The dollar grew the most against its more risk-sensitive counterparts, including the rand.

The Federal Reserve’s aggressive interest rate hikes mean investors are fleeing US Treasuries and “pouring into the currency market and buying the US dollar,” Matt Maley, chief market strategist of Miller Tabak + Co, wrote in a statement. .

“Given what’s happening with the war in Ukraine and health problems in China, it’s no big surprise that the dollar has become an even bigger magnet than usual in troubled times.”

The South African unit battled the greenback in the middle of last week following the Fed rate announcement, reaching strong levels of R15.43 against the dollar. However, by mid-morning on Monday, the local unit traded at the following levels against the major currencies:

  • Dollar / Rand: R16.13 (0.71%)
  • Pounds / Rand: R19.84 (0.38%)
  • Euro / Rand: R16.97 (0.38%)

“The markets start the week in turmoil. The continuing blockades in China, the war in Ukraine and rising inflation continue to cause concern, “said Bianca Botes, director of Citadel Global.

Gold continues to come under pressure under the strong dollar, while further increases in oil prices have been limited by slowing demand from China, he said.

Citadel Global noted that this week’s key release is US inflation, which is scheduled for Wednesday. Today we will keep an eye on the confidence numbers of local SACCI companies.

“The limit is on unstable ground,” said Botes.

Abdominal muscles He noted that although the rand has weakened sharply in recent weeks, he believes it is undervalued. The financial services group said it expects the rand to recover to R15.25 against the dollar by the middle of the year before gradually weakening to R15.75 by the end of the year.

Oil was hovering around $ 110 a barrel, Bloomberg reported. Crude oil is hit by demand hit by China’s outbreak and supply risks linked to the Russian war in Ukraine.

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