The rand strengthened to a five-month high on Wednesday, as expectations that the central bank will raise interest rates later this week and portfolio inflows helped it to recover from a dip earlier in the day.

At 5.08pm, the rand traded at R14.83 against the dollar, 0.49% firmer than its previous close and its strongest level since 27 October. Buy 7.44am on Wednesday, it had strengthened further, to R14.80/US$, after briefly ralling to R14.79/$ overnight.

Investors worldwide braced for more aggressive US rate hikes after Federal Reserve chairman Jerome Powell on Monday flagged further and faster tightening of monetary policy to deal with higher inflation than previously anticipated.

Higher rates in developed markets tend to drain capital from riskier emerging markets. However, South Africa and other commodity exporters have seen their currencies appreciate since Russia invaded Ukraine almost a month ago.

“The rand is … continuing to be driven by improved market sentiment to South Africa as risk aversion remains differentiated across emerging market currencies,” Annabel Bishop, chief economist at Investec, said in a note.

Expectations of further rate hikes by the South African Reserve Bank, which is set to announce its repo rate decision on Thursday, as well as investors inflows, are also boosting the rand, she said.

The central bank is expected to hike its repo rate to 4.25% to try to tackle inflation, according to a Reuters poll of economists who said prices could rise faster than they had expected before Russia’s invasion of Ukraine.