USD/ZAR settles above 43 1/2-month low, posts weekly loss

The USD/ZAR currency pair settled above recent low of 15.6368, its weakest level since June 10th 2022, in the wake of the Federal Reserve’s and the South African Reserve Bank’s policy decisions.

Meanwhile, the US Dollar regained strength markedly after US President Trump confirmed his nomination of Kevin Warsh as the next Federal Reserve Chair.

“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote on his Truth Social network.

“Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction,” ING’s Francesco Pesole wrote in a client note.

The Federal Reserve left its federal funds rate target range intact at 3.50%-3.75% at its January 27th-28th meeting, in line with market consensus, following three successive rate cuts last year that brought borrowing costs to their lowest level since 2022.

Yet, Governors Stephen Miran and Christopher Waller voted against the policy decision, favoring another 25 bps reduction.

FOMC policy makers highlighted that economic activity had been expanding at a solid pace, job growth had remained slow, while inflation had remained somewhat elevated.

At the regular press conference, Fed Chair Powell noted the US economy was coming into the new year on a firm footing and current interest rates were appropriate to promote progress toward both of the US central bank’s objectives.

Powell also said that the central bank was “well-positioned” to evaluate incoming data on a meeting-by-meeting basis without adhering to a predetermined rate path.

In South Africa, the SARB kept its benchmark interest rate without change at 6.75% at its January 29th meeting after a 25 bps cut in November.

The policy decision was not unanimous, as two officials supported a 25 basis point cut.

The exotic Forex pair lost 0.13% for the week.