The South African rand is currently being outperformed by the Zambian kwacha.
One Zambian Kwacha was worth R1,15 at around 04:30 pm on Monday.
According to IOL, the rand suffered a loss at day’s end as a result of the dollar strengthening in anticipation of an interest rate hike while US inflation remained high. At the time, the rand bartered at R18.20 to the US dollar.
Even after rebounding from the Covid-19 pandemic, South Africa’s economy has suffered setback after setback this year.
With oil prices fluctuating for the majority of the year, dealing with the energy crisis, and rolling blackouts imposed by the state-owned struggling power utility Eskom, to name a few, the South African Reserve Bank is currently on an upward trend of raising interest rates all year in an effort to slow down soaring inflation.
Investors worried that the recent US inflation print, which exceeded expectations, would encourage US Fed Reserve officials to continue using hawkish language to justify steep rate increases.
As a result, yesterday’s financial markets saw losses for emerging market currencies as risk-averse investors fled to safe havens and the dollar once more rose to its highest possible level in 20 years.
The election of Hakainde Hichilema, on the other hand, helped Zambia’s kwacha gain 27% against the US dollar this year.
Investors have placed significant wagers on the newly elected government of that nation securing a bailout agreement with the IMF.
The rand had already taken a hit from the US Federal Open Market Committee minutes released on Wednesday, which showed an increase in the hawkish tone last month when members increased their forecasts for interest rate hikes with a firm focus on containing inflation.
The South African Reserve Bank (SARB) is expected to follow the Fed’s lead and significantly raise interest rates at its final meeting of the year next month, according to analysts, putting the rand at risk of further declines.
The SARB’s rate-hike cycle has included 275 basis points since it started in November 2021, compared to the US Fed’s 300 basis point rate hikes to date.
