JOHANNESBURG (Reuters) -South Africa’s rand slumped by close to 4% on Thursday, one of is biggest single day losses in over two years, as the dollar recouped losses after the U.S. Federal Reserve indicated an unlikely chance of a 75 basis point rate hike.
At 1600 GMT, the rand was trading at 16.0650 against the dollar, down 3.96%.
The U.S. Federal Reserve raised rates by an expected 50 basis points, with its Chair Jerome Powell ruling out large, aggressive interest rate hikes for the year as the central bank seeks to contain inflation without triggering an economic recession.
Higher rates in developed markets tend to drain capital from riskier emerging markets such as South Africa, weighing on their currencies.
At home, continued power cuts also depressed sentiment.
State power utility Eskom was implementing another round of rotational power cuts for a third day after breakdowns at generating units.
The power cuts have sapped South Africa’s economic growth in recent years.
“The market is merely normalising after Wednesday’s over-reaction as fundamentals remain in favor of the greenback,” said Warren Venketas, analyst at forex trading firm IG.
The rand also took a beating as weakening Chinese economy looked set to continue its impact on South Africa, a major trading partner which exports a host of minerals to the Asian powerhouse, he said.
In fixed income, the yield on the benchmark government bond maturing in 2030 was up 7 basis points to 10.055%.
Shares on the Johannesburg Stock Exchange also declined on dollar outflow worries and China’s apparent weakness.
The benchmark all-share index ended down 0.96% to 69,683 points and the blue-chip index of top 40 companies closed down 1.06% to 62,902 points.
(Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Barbara Lewis and Alistair Bell)
