Dollar down for 3rd straight session

PRETORIA – The Dollar weakened against a basket of major currencies on Monday, as investors weighed the implications of a rate hike by the United States (US) Federal Reserve in an economy that may be on the cusp of a recession.

The Rand firmed to R16.79/ US$ on Monday, from a weak point of R17.24 in the previous week.

Rates

The central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday.

A hike of that magnitude would effectively close out pandemic-era support for the economy.

“Pre-fed caution is keeping the Dollar off its highs, the market is going to be eager to see if the run of softer data has in any way changed the Fed’s hawkish rate path,” said Joe Manimbo, Senior Market Analyst at Western Union Business Solutions in Washington, DC.

“The economy continues to show pretty solid underlying momentum but at the same time, high inflation, rising interest rates, they are certainly having an impact on the economy.”

Inflation

Recent data had shown signs of an economic slowdown while inflation remained stubbornly high, with claims for jobless benefits rising to its highest in eight months last week and regional manufacturing gauges slumping.

Later in the week, investors will also eye the advance reading for second-quarter gross domestic product and personal consumption expenditures, the Fed’s preferred inflation measure.

“US economic growth is slowing and inflation is way too high”, US Treasury Secretary Janet Yellen said on Sunday.

The Dollar Index fell 0.159 per cent at 106.520, with the Euro up 0.05 per cent to US$1.0215.

Last week, the greenback saw its biggest weekly percentage decline in two months, as a rally in equities helped dent the appeal of the safe-haven Dollar and a 50 basis point rate hike by the European Central Bank helped buoy the Euro to a twoweek high.

On Monday, Latvian Central Bank Governor Martins Kazaks said in an interview with Bloomberg News that the ECB might not be done with big rate hikes.

The JSE fell half a per cent on Monday, with Gold Fields (-7 per cent) Harmony (-7 per cent) and AngloGold (-5 per cent) taking strain.