(Reporting by Nellie Peyton Editing by Alexander Winning)
JOHANNESBURG, March 8 (Reuters) - The South African rand
dropped sharply overnight and hit its lowest level in almost
three years early on Wednesday, after hawkish comments from U.S.
Federal Reserve Chair Jerome Powell and South African data
showed a sharp economic contraction.
At 0630 GMT, the rand traded at 18.6000 to the
dollar, marginally weaker than its closing level on Tuesday and
the lowest it has been since May 2020 in the first months of the
COVID-19 pandemic.
The biggest driver was a warning from Powell the previous
day that U.S. interest rates might need to go up even faster and
higher than expected to rein in inflation, said ETM Analytics in
a research note.
His comments pushed the dollar to multi-month highs against
most other major currencies on Wednesday.
The rand's slide was compounded by gross domestic product
(GDP) figures released on Tuesday that showed South Africa's
economy contracted more than expected in the fourth quarter of
last year.
If it contracts again in the current quarter, South Africa
will be in a recession.
"A strong ZAR view relied heavily on the USD losing ground,
but the chances of that happening in the near term have
evaporated," ETM said.
The government's benchmark 2030 bond was
slightly weaker in early deals, with the yield up 2 basis points
to 10.190%.
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