Rand Recovers After Fed Rate Hike | Market Update

Good morning

The bad news is the FED lifted US interest rates and the Dollar shot higher as a result, but the good news is the market moves on from such events rather quickly and the Rand has already clawed back all of its losses.  The other bit of good news is it’s Friday!!!

These are the mid rates at 5:50 today:

USD = R16.24	AUD = R11.58
GBP = R21.72	DXY = 100.23
EUR = R18.65	Brent Crude = $103.99 per barrel

Market News

• The currency market behaved as expected on Wednesday night with Dollar strength hurting the Rand as we fell from R16.25 to R16.41 in double quick time.  But rather than adding to those losses yesterday we gradually chipped away at things with an eventual recovery back to R16.21 before closing the day at R16.25, exactly where we were before the FED announcement hit.  We still have one more risk event to get past this morning before we can endure the rest of a very soggy Friday, and into the weekend. 
• The week’s main event went off as expected and the immediate impact on the currency market was clear to see.  The FED lifted US interest rates by 25 basis points for the first time since 2023 and the fact that this was a unanimous decision with all 12 votes calling for a hike showed that A) they are committed to fighting elevated inflation, and B) the FED is asserting its independence from the White House.  The move went a long way to restoring the central bank’s credibility in an environment where the market was becoming concerned about complacency in a higher inflation environment, and as is always the case when the FED lifts rates this is Dollar positive.
• The FED hiked rates while signalling further increases down the road and the Dollar shot north as you’d expect, but the good news for the Rand is there seems to be a difference between what the market was pricing in and the messaging that the FED provided.  The market was gearing up for one more hike in 2026 and a further three in 2027 but the FED is projecting one more in 2026, maybe, and then going on hold next year, and this more dovish stance when compared to the market’s view is part of the reason why the Rand is back its level pre FED announcement. 
• The following from CNBC:  The Dollar eased against ⁠the Euro on Thursday, a day after logging its biggest jump in three months against the common currency after the FED hiked rates and signalled further ​tightening. Though the FED may have delivered on the market’s hawkish expectations for now, it might still not raise rates as aggressively as the market expects, making the Dollar vulnerable to any disappointment. Markets remain far more hawkish than the FED. While policymakers project one more rate hike in 2026 and a hold in 2027, investors are pricing in more than one additional increase this year and roughly three more by the end of 2027.
• Another reason why the Dollar gave up ground yesterday was an easing of concerns around the supply of oil out of the Middle East, this as Saudi Arabia announced increased delivery options via Oman as an alternative to their East-West pipeline that has been temporarily closed to repair drone inflicted damage.  With Brent Crude dropping slightly to $104/barrel that would have pulled the Dollar lower.   
• The last risk event for the currency market has just taken place, that being the Bank of Japan’s policy announcement where they confirmed a 25 basis point hike as expected.  Given that this hike has come three months after their last hike, and not six months as has been the case since they started hiking in 2024, this move could be seen as more hawkish and therefore good for the Yen, but as yet the currency market has barely moved.  The Rand is hoping that should Yen strength materialise, then that would weigh on the Dollar; let’s see how the rest of the session plays out. 
• No local market data today. 
• Possible USD mid-rate trading ranges in the Rand today are R16.10 and R16.40.

GLOBAL INVESTMENT OFFERING!!!

Foundation Fund Managers gives you the opportunity to invest in international shares, which gives you direct access to owning the likes of Google, Caterpillar, Amazon, Apple, Nvidia, Home Depot, Walmart, VISA, Microsoft or any other company listed on the London Stock Exchange, NASDAQ or NYSE.

We also offer local share portfolios with a bespoke selection of stocks listed on the JSE.   

For more information please contact Hadyn Little on:

084 910 8078 or [email protected]