Rand dips from three-week high

Johannesburg - The rand retreated on Monday from its firmest levels in three weeks following the decision to keep US interest rates steady, as the market set its sights on the likelihood of a Federal Reserve rate hike this year.

The rand snapped Friday's gains as bulls ran out of steam after a top Fed policymaker said a rate hike this year is still likely. A sell-off of Asian equities also saw the rand beginning the week on the back foot.

Government bonds mirrored the rand, with the paper due in 2026 adding 3.5 basis points to 8.370%.

Stocks opened 328 points lower, with the blue-chip Top-40 index down 0.72% by 09:02.

The rand was 0.27% softer at R13.3515/$ compared with Friday's New York close of 13.3150.

"Last week’s ZAR short covering is overdone, given that the lingering threat of Fed policy rate normalization and persistently sluggish demand indicators out of China have not disappeared," said Peter Worthington an economist at Barclays.

Worthington added that "the balance of risks favours a move back up to the 13.50/USD area by month-end."

Dollar strength also affected the rand as investors adjusted their positions after the Federal Reserve last week delayed a long-anticipated hike in US interest rates.

On the local front, the monetary policy pommittee (MPC) will announce its decision on rates on Wednesday. The MPC lifted interest rates by 25 basis points to 6.00% in a borderline call in August.

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