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South Africa's Rand Weakens, U.S. Rate-Hike Bets Lift Dollar

JOHANNESBURG, March 22 (Reuters) - The South African rand weakened against a stronger dollar early on Tuesday as investors braced for more aggressive U.S. rate hikes, with traders' focus also on local interest rate decision and inflation data.

At 0615 GMT, the rand traded at 14.9600 against the dollar, around 0.4% weaker than its previous close.

The dollar strengthened after U.S. Federal Reserve Chair Jerome Powell on Monday delivered his most muscular message to date on his battle with too-high inflation as he flagged a more aggressive tightening of monetary policy than previously anticipated.

Higher rates in developed markets tend to drain capital from higher-yielding but riskier emerging markets such as South Africa, weighing on their currencies.

Focus at home was also on interest rates, with the South African Reserve Bank set to announce its repo rate decision on Thursday.

The central bank is expected to hike its repo rate to 4.25% to try to assuage inflationary risks, according to a Reuters poll of economists who said prices could rise faster than they had expected before Russia's invasion of Ukraine.

Ahead of that, Statistics South Africa will publish February consumer price inflation numbers on Wednesday.

Government bonds also weakened, with the yield on the benchmark 2030 maturity rising 13 basis points to 9.785%.

Reporting by Olivia Kumwenda-Mtambo; Editing by Sherry Jacob-Phillips

Source: Reuters

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