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Rand on track to give up nearly all Q1 gains

The Reserve Bank is expected to continue hiking rates moving forward.
The Reserve Bank is expected to continue hiking rates moving forward.

The rand swung between gains and losses as eight straight days of declines leading up to Wednesday caused the currency to give back nearly all the gains made in the first quarter of the year.

“The rand is a proxy for emerging market risk, so it does tend to swing a bit with global sentiment but we will continue to see it weaken because of declining gold prices and rising inflation,” said Lukman Otunuga, senior research analyst at FXTM.

“The South African Reserve Bank is expected to continue hiking rates moving forward but with the way things are going (Eskom power cuts and floods), probably more weakness may be the name of the game.”

The MSCI's index for emerging market currencies extended falls to the ninth straight session on Thursday, with Asian units leading the sell-off as the dollar climbed higher.

The currency gauge slipped 0.3% to its weakest level in 17 months, while logging its longest losing streak in at least 13 years.

The U.S. Federal Reserve is set to embark on the first of many 50 basis points interest rates hikes next week, placing the dollar on the cusp of its highest in two decades and weighing heavily on emerging market currencies.

Concerns about slowing economic growth in China due to its prolonged COVID-19 lockdowns as well as rising inflationary pressure have also hurt emerging markets after one of the sector's strongest quarters.

The Thai baht, South Korean won and the Indonesian rupiah all slipped about 0.5% each, with the rupiah pressured by a broadening of Indonesia's ban on palm oil exports.

Turkey's lira edged 0.2% higher against the dollar. Turkish central bank governor Sahap Kavcioglu expects inflation to peak about 70% before June this year, with some estimates rising near 75%.

The Russian rouble extended gains in Moscow trade, supported by month-end tax payments that led to increased conversion of foreign currency into roubles.

Emerging markets stocks staged a comeback, rising 1% but headed for their worst monthly performance since the onset of the pandemic in March 2020.

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