The rand stabilised on Thursday morning after suffering its biggest one-day drop in four months against the US dollar.
This was after the US Federal Reserve officials sped up their expected pace of policy tightening.
US policy makers disclosed in their June communications that they were starting a discussion about scaling back bond purchases, and two hikes are likely by the end of 2023, according to Fin24.
The morning after the Fed said ‘talking about talking about tapering”. Risk assets the first to take a knock and the world’s best performing currency against USD in 2021, the rand taking a smack and trading back above 14.00. pic.twitter.com/9ZcOsbwfuS
— Nick Kunze (@NickKunze2) June 17, 2021
The rand fell as much as 1.95% to R14.04/$ in the US session, its lowest level in three weeks, before pulling back slightly to trade at R14/$.
It was also at R19.60/pound and R16.80/euro.
A higher interest rate environment strengthens the dollar and by extension, weakens emerging market currencies like the rand.
Fed chair Jerome Powell also indicated that the world’s most influential central bank will consider scaling back its bond purchases, said Business Day.