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SA assets fall on Ukraine crisis, Fed meeting

The rand and stocks weakened on Monday.
The rand and stocks weakened on Monday.

The rand and stocks weakened on Monday on concerns about a potential conflict over Ukraine and ahead of central bank meetings this week that could influence the trajectory of domestic and international interest rates.

At 1553 GMT, the rand traded at 15.2800 against the dollar, 1.16% weaker as rising tensions between Russia and the West over Ukraine encouraged investors to take refuge in the safe haven dollar.

The dollar rose to a two-week high against a basket of currencies, boosted also by expectations of a hawkish stance from the U.S. Federal Reserve this week, which could eventually lead to a rate hike in March.

The Fed holds a two-day policy meeting on Tuesday and Wednesday.

The Reserve Bank (SARB) will announce its first rate decision of 2022 on Thursday, with economists polled by Reuters expecting a 25 basis points increase in the repo rate to 4.00%.

Tighter Fed policy tends to drain capital away from emerging markets like SA, so the outlook for US monetary policy is a major driver for rand assets.

Other potential drivers this week include the SARB's leading business cycle indicator on Tuesday, December producer inflation data on Thursday and December budget figures on Friday.

The government's 2030 bond fell, with the yield increasing by 6 basis points to 9.3%.

Shares on the JSE plunged in a global rout on equity markets as the prospect of a conflict over Ukraine led investors to book profits from riskier assets.

The benchmark all-share index slumped by 3.57%, its biggest drop since the beginning of the year, to 72,164 points, and the blue-chip index of top 40 companies slipped by 3.71% to 65,653 points.

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