The rand hit a new 12-month low in early trade on Tuesday, as the dollar jumped on bets for quicker interest rate increases after US President Joe Biden backed Federal Reserve chair Jerome Powell for a second term.
At 6.20am, the rand traded at R15.88 against the dollar, 0.19% weaker than its previous close, and trading at its weakest since November 2020.
Biden chose Powell over the other leading candidate Lael Brainard, whom markets consider to be the more dovish of the two, though Brainard will be Fed vice chair.
The move reinforced market expectations of US rate rises next year when the central bank finishes tapering its emergency bond buying programme.
Higher rates in developed countries often drain capital away from higher-yielding but riskier emerging markets such as South Africa, weighing on their currencies.
Riskier assets have also been shaken up over recent sessions amid surging Covid-19 cases in Europe and renewed curbs, dousing investor hopes of a quicker recovery in consumption and growth worldwide.
Government bonds also weakened, with the yield on the benchmark 2030 maturity up 1.5 basis points to 9.61%. — (c) 2021 Reuters
