South African Rand Remains Subdued
The South African rand traded around 16.5 per US dollar, staying close to its lowest since July, as a firm dollar and elevated crude prices continued to weigh on the currency despite the recent pullback. Meanwhile, the rise in prices of key precious metals such as gold offered limited support. In South Africa, households and businesses are facing higher fuel costs, which raises the likelihood of another rate hikes. The South African Reserve Bank recently warned that second-round effects could cause higher fuel and transport costs to spread to broader prices, wages and inflation expectations. A weaker rand and the risk of a severe El Niño added further upside risks, particularly to imported and food inflation. The central bank argued that early action was necessary to prevent temporary price shocks from becoming entrenched, despite the weak economic growth outlook.
5 per US dollar, staying close to its lowest since July, as a firm dollar and elevated crude prices continued to weigh on the currency despite the recent pullback. Meanwhile, the rise in prices of key precious metals such as gold offered limited support. In South Africa, households and businesses are facing higher fuel costs, which raises the likelihood of another rate hikes. The South African Reserve Bank recently warned that second-round effects could cause higher fuel and transport costs to spread to broader prices, wages and inflation expectations.
A weaker rand and the risk of a severe El Niño added further upside risks, particularly to imported and food inflation. The central bank argued that early action was necessary to prevent temporary price shocks from becoming entrenched, despite the weak economic growth outlook.