USD/ZAR: Rand falls on US rate prospects ahead of local data

The South African Rand retreated sharply against a stronger US Dollar on Tuesday on prospects that US interest rates may remain elevated for longer.

The benchmark 10-year US Treasury yield rose as high as 4.56% earlier on Tuesday, a level not seen since October 2007.

The US Dollar Index was last inching up 0.05% on the day to 106.001, after hitting its highest level since last November at 106.204 earlier in the session.

“While the rand has been doing very well, there is no point in fighting against a stronger USD,” Rand Merchant Bank analysts wrote in an investor note.

In terms of local macro data, Statistics South Africa is due to release the official Producer Price Index figures for August at 9:30 GMT on Thursday.

Producer prices probably rose at an annual rate of 3.7% last month, according to market consensus estimate, following a 2.7% surge in July.

Meanwhile, South African trade balance report for August, due out at 12:00 GMT on Friday, is expected to reveal a ZAR 8 billion trade surplus.

In July, South Africa registered a trade surplus of ZAR 15.96 billion, or the largest such since September 2022. Total exports surged 4.6% month-over-month to ZAR 174 billion in July, mostly driven by shipments of vehicles and transport equipment as well as by vegetable products. Total imports decreased 7.6% month-over-month to ZAR 158 billion.

Along with local data, the Rand is likely to be affected by a host of international macro data prints, most notably US GDP, core PCE inflation and personal spending figures. The latter could provide more clues on future US interest rate trajectory.

As of 10:10 GMT on Tuesday USD/ZAR was gaining 0.85% on the day to trade at 18.9220.