The rand fell the most in seven months after US inflation came in higher than consensus forecasts.
Quicker inflation in the US could mean a further delay in the Federal Reserve’s plans to cut interest rates. Inflation in the world’s largest economy accelerated to 3.5% in March from 3.2% in February, while analysts had expected 3.4%. The data saw the dollar firm against most global currencies, with those of emerging markets faring worst.
The US is targeting an inflation rate of 2%, so is still some way off that goal, which means borrowing costs are likely to remain at two-decade highs for longer than expected.
The higher inflation number was fuelled in part by an increase in the oil price, which has risen markedly due tension in the Middle East and the Russian invasion of Ukraine.
At 6.40pm on Wednesday Brent crude had risen 0.33% to $89.45 a barrel. It is up more than 16% so far this year. The rand had weakened 1.51% to R18.7527/$, 0.31% to R20.1283/€ and 0.44% to R23.4898/£.
The dollar’s strength saw the gold price turn negative after setting new record highs for 12 straight days. US treasury yields also rose on the day with 10-year paper now offering 4.52%, the highest since November. Bond yields move inversely to their price.
While the JSE was flat on the day, with the all share index ending at 75,520 points, miners took a knock as precious metal prices fell on the rampant dollar. Banks and financials were also hard hit as higher interest rates for longer means money will remain in the safe haven of the dollar and gold, and it could be a while before global investors begin moving money back into emerging markets.
The banking index fell 1.66%, financials 1.22% and precious metals and miners 0.75%.
Of the big four banks, Nedbank fared worst, recording its biggest one-day loss since early December 2022, slumping 5.15% to R224.48. Standard Bank was down the most in four weeks, losing 3.37% to R177.67. It is worth noting, however, that both traded ex-dividend on the day.
Bucking the general trend were Exxaro, up the most in three weeks, gaining 6.07% to R189.34, while equipment manufacturer and seller Barloworld rose 4.65% to R72.
At 7pm gold had fallen 0.73% to $2,335.46/oz and platinum 1.56% to $962.10/oz. Spot gold reached a record high of $2,365.30/oz on Tuesday.
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