(Reuters) -South Africa’s rand fell on Thursday, as the dollar scaled new highs, driven by expectations that the U.S. Federal Reserve could hike interest rates later this month to combat soaring inflation.
At 1603 GMT, the rand was 1.52% weaker at 17.1875 against the dollar.
The dollar index, which measures the U.S. currency against six rivals, rose 0.2% to 108.54. It had earlier climbed to 109.29, the highest since Sept. 2002.
“USD-ZAR volatility is expected to remain heightened in the near term,” economists at ETM Analytics said in a note.
Federal Reserve Governor Christopher Waller said on Thursday he supports another 75-basis-point interest rate increase, but would lean toward a larger hike if incoming data shows demand is not slowing fast enough to bring inflation down.
The recessionary fears have weighed on emerging market currencies, prompting investors to switch from riskier assets such as the rand to safe-haven assets like the dollar.
Stocks closed lower on the Johannesburg Stock Exchange (JSE), mirroring losses in global equities. JSE’s Top-40 index dropped 2.32% while the broader all-share index fell 2.16%.
The government’s benchmark 2030 bond yield was up 21.5 basis points at 11.010%.
(Reporting by Bhargav Acharya in Bengaluru and Anait Miridzhanian in Gdansk; Editing by Christopher Cushing and Vinay Dwivedi)
