This week, markets around the world were jolted by clear indications from the US Federal Reserve that it intends to raise interest rates quickly.

The minutes of the Fed's most recent monetary policy meeting, released this week, revealed that officials were concerned about inflation but confident in the US economy's ability to handle interest rate hikes.

"It may become warranted to raise the federal funds rate sooner or at a faster pace than participants had previously anticipated," according to the minutes.

This sent shivers through global markets, with shares plummeting as investors considered the negative impact of higher interest rates on consumer spending and corporate debt levels.

It was also supposed to hurt the rand because the dollar would earn higher interest rates, making the rand look less appealing in comparison.

Instead, the rand strengthened. It was last trading at R15.58/$ after trading above R16/$ earlier this week.

According to Wichard Cilliers, head of market risk and chief dealer at TreasuryONE, the rand has strengthened against all expectations and is the strongest emerging market currency for 2022 so far.

The rand was expected to weaken ahead of aggressive interest rate hikes in the United States, but it was supported by other factors, according to Citadel's chief economist Maarten Ackerman.

Among them is the expectation that the South African Reserve Bank will also raise rates quickly, which the markets have begun to price in.

According to Ackerman, the bank has made it clear that if interest rates in the United States rise, it will not simply remain unchanged.

"I believe market participants have begun pricing in the possibility that our local rates will rise as well, given the guidance provided by the SA Reserve Bank [at the most recent MPC meeting], now that the Fed is becoming more aggressive." The next policy meeting of the local bank will take place on January 25.

According to Wichard Cilliers, head of market risk and chief dealer at TreasuryONE, the rand has strengthened against all expectations and is the strongest emerging market currency for 2022 so far.

The rand was expected to weaken ahead of aggressive interest rate hikes in the United States, but it was supported by other factors, according to Citadel's chief economist Maarten Ackerman.

Among them is the expectation that the South African Reserve Bank will also raise rates quickly, which the markets have begun to price in.

According to Ackerman, the bank has made it clear that if interest rates in the United States rise, it will not simply remain unchanged.

UpdatedDaily