- Currency is worst performer among 16 major currencies
- Reserve Bank seen leaving policy rate unchanged Wednesday
South Africa’s rand weakened the most in almost three weeks, leading currency declines against the dollar as traders bet the nation’s central bank will leave interest rates unchanged on Wednesday.
The currency of Africa’s most-industrialized economy slumped 1.6 percent to 13.6889 per dollar by 4:02 p.m. in Johannesburg, the biggest fall on an intraday basis since Sept. 4 and the most out of 16 major currencies tracked by Bloomberg.
The Federal Reserve left borrowing costs unchanged last week, making it more likely the South African Reserve Bank will leave its policy rate on hold on Wednesday, with 29 of 31 economists in a Bloomberg survey predicting no change. That would risk eroding the rand’s interest-rate advantage over the dollar when the Fed does move. The dollar reached its strongest level in almost two weeks against the euro on Thursday after Fed officials said the U.S. economy is strong enough to withstand an interest-rate increase this year.
“We’re seeing some guys positioning for the flat move as we go into tomorrow’s” Monetary Policy Committee rate announcement, Mohammed Nalla, the Johannesburg-based head of strategic research at Nedbank Group Ltd., said by phone. “The Fed not doing anything has given the Reserve Bank the scope to keep rates flat for now.”
The Reserve Bank has raised the benchmark interest rate twice since July last year even as the economy risks falling into recession for the first time since 2009. Forward-rate agreements, used to speculate on interest rates, are predicting less than a 20 percent chance of a rate increase tomorrow.