Fri. Apr 12th, 2024

The South African rand entered the week on a less sturdy note, as it contended with apprehensions about China’s economic well-being and the likelihood of another interest rate increase by the U.S. Federal Reserve.

By 15:16 GMT, the rand was trading at 19.0475 against the dollar, marking a 0.44% depreciation from its closing value on the preceding Friday.

Experts caution that further decline might be in store for the rand. This is due to concerns arising from China’s lackluster economic indicators, an unexpectedly high core producer inflation rate in the U.S., and growing expectations of another interest rate hike by the Federal Reserve in September.

“Apprehensions about the global economic outlook exert a negative impact on the rand, especially as increased risk aversion in international financial markets comes into play,” explained Annabel Bishop, an analyst at Investec.

Bishop also noted that the rand’s weakness could be attributed to investors being more cautious during the northern hemisphere’s summer vacation period, which typically experiences lower trading volumes. This contributes to amplified market volatility in response to events.

ETM Analytics downplayed the potential market influence of South Africa’s upcoming data releases this week, including second-quarter unemployment figures set for Tuesday and June retail sales data scheduled for Wednesday. The organization emphasized that South Africa’s economy is grappling with significant pressure. The rise in U.S. bond yields is expected to keep the rand exposed to vulnerability.

This week’s U.S. releases, particularly the Federal Reserve minutes, are projected to wield more significant impact, according to ETM Analytics.

Meanwhile, shares on the Johannesburg Stock Exchange encountered a downturn, resulting in the blue-chip Top-40 index closing with a decline of over 1.1%.

Additionally, South Africa’s benchmark 2030 government bond faced a setback, witnessing a 16.5 basis point increase in yield, reaching 10.330%.

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