South Africa's rand slumps after Fed hike, stocks drop (updated)

IG Port

05/05/2022 17:16

(Updates prices, adds stocks)
    JOHANNESBURG, May 5 (Reuters) - South Africa's rand slumped
by close to 4% on Thursday, one of is biggest single day losses
in over two years, as the dollar recouped losses after the U.S.
Federal Reserve indicated an unlikely chance of a 75 basis point
rate hike. 
    At 1600 GMT, the rand  .ZAR=D4  was trading at 16.0650
against the dollar, down 3.96%. 
    The U.S. Federal Reserve raised rates by an expected 50
basis points, with its Chair Jerome Powell ruling out large,
aggressive interest rate hikes for the year as the central bank
seeks to contain inflation without triggering an economic
recession.  urn:newsml:reuters.com:*:nL2N2WW1W8
    Higher rates in developed markets tend to drain capital from
riskier emerging markets such as South Africa, weighing on their
currencies.
    At home, continued power cuts also depressed sentiment.
    State power utility Eskom was implementing another round of
rotational power cuts for a third day after breakdowns at
generating units. The power cuts have sapped South Africa's
economic growth in recent years.
    "The market is merely normalising after Wednesday's
over-reaction as fundamentals remain in favor of the greenback,"
said Warren Venketas, analyst at forex trading firm IG.
    The rand also took a beating as weakening Chinese economy
looked set to continue its impact on South Africa, a major
trading partner which exports a host of minerals to the Asian
powerhouse, he said.
    In fixed income, the yield on the benchmark government bond
maturing in 2030  ZAR2030=  was up 7 basis points to 10.055%.
    Shares on the Johannesburg Stock Exchange also declined on
dollar outflow worries and China's apparent weakness.
    The benchmark all-share index  .JALSH  ended down 0.96% to
69,683 points and the blue-chip index of top 40 companies
 .JTOPI  closed down 1.06% to 62,902 points.

 (Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; 
Editing by Barbara Lewis and Alistair Bell)
 ((Olivia.Kumwenda@thomsonreuters.com; +27 10 346 1084;))