Rand surprises to firm after US Fed hikes rates

The rand on Wednesday surprised analysts by firming during the day and holding onto its gains even after the US Federal Reserve Bank raised interest rates.

Bianca Botes of Peregrine Treasury Solutions said in a snap morning note to clients that the local currency's behaviour was not what most market watchers had predicted. 

"The rand displayed peculiar behaviour by gaining 1.58% leading up to the Federal Reserve interest rate announcement on Wednesday evening," she said.

The Fed, as expected, raised interest rates rates by 25 basis points to 2.25% just after 20:00 South African time. 

"The rand surprised by gaining momentum to trade at R14.11/$ shortly after the announcement was made," noted Botes. Analysts had thought it more likely the rand would come under pressure if rates were hiked. 

 At 07:22 on Thursday the local currency was trading at R14.17 to the greenback, down 0.3% on the day. 

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER