South Africa’s Rand Set for Weekly Decline on U.S. Rate BetsXola Potelwa
South Africa’s rand headed for its biggest weekly drop in a month, declining in line with emerging-market peers as traders raised bets that U.S. borrowing costs will climb this year.
The rand weakened 0.3 percent to 11.9817 per dollar as of 10:52 a.m. in Johannesburg, bringing its depreciation this week to 1.6 percent, the most since the five days ending March 13.
The dollar strengthened on Friday against 15 out of 24 emerging-market currencies monitored by Bloomberg as investors focused on prospects for the Federal Reserve to increase interest rates as global peers ease policy. A gauge of the greenback set its highest close in three weeks Thursday.
“The general trend has been a dollar story,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. The rand was “playing catch-up” with other emerging-market currencies that tumbled more earlier in the week, he said.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, has added 1.6 percent this week. There’s a 58 percent chance the Fed will boost rates by year-end, up from a 53 percent probability at the start of this week, according to swaps data compiled by Bloomberg.
“Since yesterday high-yielding emerging-market currencies are under pressure with the rand taking the lead as the ultimate risk-sentiment proxy,” Bernd Berg, a London-based emerging markets strategist at Societe Generale SA, said by e-mail on Friday.