Rand heads for almost 4% weekly loss on hawkish Fed
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JOHANNESBURG - The rand fell steeply on Friday, heading for a weekly loss of almost 4 percent after the US Federal Reserve's hawkish message on monetary policy dented investor appetite for riskier assets.
At 1603 GMT, the rand traded at 14.2950 against the dollar, roughly 1.2 percent weaker than its previous close and down 3.7 percent on its closing level from the end of last week.
The Fed's sudden turn on Wednesday revitalised the dollar and US Treasury yields, diminishing the attraction of emerging market currencies for carry trade - whereby investors borrow cheaply in one currency and buy assets in another where returns are higher.
Along with favourable commodity prices, carry trade has helped make the rand one of the best-performing emerging market currencies this year, despite the weak state of the local economy.
Kevin Lings, chief economist at South African asset manager Stanlib, said in a research note that moderating commodity prices were another factor that could be contributing to rand weakness, adding it was still too early to gauge an underlying trend.
In fixed income, the yield on the benchmark 2030 government bond rose 2 basis points to 8.96 percent, reflecting slightly weaker prices.
Johannesburg-listed stocks dropped for the third straight session.
The All-share index lost 1.43 percent to end the week at 65,635 points and the blue-chip Top-40 index slid 1.48 percent to 59,504 points.
"We're in a difficult period. And I think from now on, we're going to have a lot of volatility which is going to be centred around anything that comes out of the Fed," said local analyst David Shapiro.