The USD/ZAR price dropped to the lowest point since June 29th as the market focused on the relatively weak US consumer inflation data. The pair dropped to a low of 16.12, which was about 6.50% below the highest point on June 14.
Risk-on sentiment
The USD to rand price crashed after the Bureau of Labour Statistics (BLS) published the latest US inflation data.
The data revealed that the country’s inflation declined modestly in July as the price of gasoline pulled back. During the month, gasoline averaged about $4.20, which was much lower than the previous month’s $5.
Additional data published on Thursday showed that the producer price index (PPI) moved from 1.0% in June to -0.5% in July. It dropped from 11.3% to 9.3% on a year-on-year basis.
Therefore, the dollar index declined as investors predicted that the Federal Reserve will slow its rate increases. The bank has already hiked rates by 225 basis points and hinted that it will continue tightening.
Fed’s officials believe that more tightening is necessary. In an interview with the FT, Mary Daly said that the bank will not be complacent on inflation. As a result, she supports several more hikes this year. The same view was repeated by other Fed officials like Neel Kashkari and Charles Evans.
The USD/ZAR price declined sharply even after some worrying economic data from South Africa. According to the country’s statistics agency, manufacturing production declined from 0.2% in May to -1.5% in June. That decline was worse than the median estimate of -0.5%. It translated to a year-on-year decline of 3.5%.
Still, the South African Reserve Bank (SARB) will likely continue hiking rate hikes. In July, the bank decided
