(Updates prices to reflect afternoon trade)
JOHANNESBURG, March 8 (Reuters) - The South African rand
recovered some ground on Wednesday after hitting its lowest
level in almost three years after South African data showed a
sharp economic contraction and on hawkish comments from U.S.
Federal Reserve Chair Jerome Powell.
At 1531 GMT, the rand traded at 18.5200 to the
dollar, 0.42% stronger than its closing level on Tuesday.
Earlier on Wednesday it hit 18.7200, the lowest since May 2020
during the first months of the pandemic.
The biggest driver was a warning from Powell on Tuesday that
U.S. interest rates might need to go up even faster and higher
than expected to rein in inflation, ETM Analytics said.
Powell's comments pushed the dollar to multi-month highs at
one point 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 survey published on Wednesday showed South Africa's
business confidence fell in the first quarter, dragged down by
long hours of power cuts and deteriorating household income.
"SA risks a contraction in GDP in Q1.23, with a recession
increasingly likely as the state is unable to turn the collapse
in security of supply of electricity around," Investec analyst
Annabel Bishop said.
Shares on the Johannesburg Stock Exchange slumped, mirroring
similar moves in global equities as Powell's comments spooked
markets.
South Africa's broader-all share index closed down
1.04%, while the top-40 index ended 1.11% lower.
The government's benchmark 2030 bond was
stronger, with the yield down 5 basis points to 10.165%.
(Reporting by Nellie Peyton and Bhargav Acharya; Editing by
Alexander Winning and Shounak Dasgupta)
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