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Rand touches R16/$ as investors digest hot US inflation

The JSE looks set to contend with significant market pressure on Monday morning, with the rand touching R16/$ for the first time in almost a month, as the market reacts to US inflation numbers.

US consumer inflation accelerated to 8.6% year on year in May, data showed on Friday, faster than expected, and putting an end to the hope the US Federal Reserve will pause its interest rate hiking cycle later in the year.

The JSE had already shown some reaction to the numbers, falling 1.6% on Friday, when Wall Street came under significant pressure, with the tech-heavy Nasdaq closing more than 3.5% lower.

Sentiment may be muted this week ahead of the Fed policy announcement on Wednesday, when a 50 basis interest rate hike is expected, and the market will be closely scrutinising the central bank’s plans for the rest of the year.

Mass testing in China at the weekend also has lockdown nerves elevated once again, Oanda senior market analyst Jeffrey Halley said in a note.

“Today’s data calendar is non-existent, which means markets will be allowed to stew in sentiment and risk aversion,” he said.

In morning trade, the Hang Seng was down 2.81% and Japan’s Nikkei 2.74%, while the Shanghai Composite was down 1.11%.

Tencent, which influences the JSE via the Naspers stable, had slumped 4.6%.

Gold was down 0.45% to $1,863.23/oz while platinum was 1.33% lower at $962. Brent crude was down 1.99% to $120.38 a barrel.

The rand was 0.8% weaker at R15.97/$, having lost 2.31% on Friday, and having touched $16/$ in intraday trade on Monday morning.

The local corporate and economic calendars are bare on Monday.