Rand holds at R16,24 as markets wait on the US Fed's first hike since 2023

The rand held steady at R16,24 to the dollar on Wednesday morning while Brent crude traded above $108 a barrel, as global markets waited on a Federal Reserve decision expected later in the day.

Markets are pricing in close to a 90% chance that the Fed raises its benchmark rate by 25 basis points, according to Investec. That would be the first increase since 2023.

As IOL reported on 16 September, the rand gained marginally against the dollar despite the cautious mood ahead of the announcement and the pull of US Treasury yields near 5%. The report was accurate on the numbers and the mood. What it did not carry is what the decision means for the person holding a bond, a vehicle finance agreement or a shop lease in South Africa.

Why the Fed matters here

South Africa is a small, open economy that borrows in dollars and rands. When US rates rise, global money tends to move towards dollar assets, which puts pressure on currencies like ours and raises the cost of the foreign debt the government and large companies carry.

The Reserve Bank’s Monetary Policy Committee meets on 23 September. Expectations are leaning towards a 25 basis point increase at that meeting, a move that would push the repo rate to 7,25% and the prime lending rate to 10,75%.

For a household with a R1 million home loan on prime, a 25 basis point rise adds roughly R170 a month to the repayment. For someone servicing R300 000 in vehicle finance, it is closer to R50. Neither figure is catastrophic on its own. Stacked across a year of increases, it is the difference between a family keeping a second car on the road and selling it.

What the Fed has already done to the world

US 10-year Treasury yields pushed above 5% this week, a level last seen in 2007 before the global financial crisis. That yield is the reference price for money everywhere, and it has already dealt a blow to the global equity rally that took several markets to record highs in the first half of the year.

Asian equities staggered between gains and losses on Wednesday morning, with Tokyo, Shanghai, Sydney and Manila lower and Hong Kong, Singapore, Wellington, Taipei and Jakarta also down. Seoul was flat. Wall Street and European markets had sold off the day before, with the Dow closing 0,6% lower at 52 093,11 and the FTSE 100 down 0,4% at 10 658,13.

The oil price is the other half of the story. Brent North Sea crude eased 0,4% to $108,30 a barrel, with the Middle East war and the supply risk around it keeping the price well above $100. Brent traded at $107,85 on Tuesday morning after easing 0,83% overnight.

“For traders, the most interesting part of the statement will be the vote, specifically how many of the 12 members (if any) vote to leave interest rates unchanged,” wrote Matt Weller at FOREX.com.

Weller’s point matters for South Africa. If three or more Fed members dissent, or if chair Kevin Warsh dissents, the market may read the increase as a one-off insurance move rather than the start of a new cycle. A unanimous decision makes another increase this year more likely. Those two outcomes point the Reserve Bank in different directions.

The vote that will tell us what comes next

Fed chair Kevin Warsh sharpened expectations last month with what the market read as a hawkish speech at the Jackson Hole gathering of central bankers and economists in Wyoming. With US inflation running well above the Fed’s target and oil holding above $100, the case for a rise has been building for weeks.

Invesco’s David Chao argued that currency markets are still pricing in a consensus that US inflation will return to 2%. “It is very possible that US inflation instead settles closer to three per cent,” he said. If the Fed is seen as less credible on inflation, investors may become less willing to hold dollars simply because US rates are higher. That is the scenario in which the rand finds support rather than losing it.

The Bank of England is expected to hold its benchmark rate on Thursday as the UK economy struggles to grow. Also on the radar is a planned summit between US President Donald Trump and Chinese counterpart Xi Jinping, with reports that the two sides could agree tariff reductions on some goods, including US energy and agricultural products, extending a one-year truce agreed in 2025.

For South African exporters, a tariff truce between Washington and Beijing would ease pressure on global demand for commodities. For the mining and agricultural sectors that sell into Asia, it would matter more than the Fed decision itself.

What to watch on 23 September

The Reserve Bank’s statement on 23 September will set out the MPC’s reasoning, and the vote split will be as important as the decision. Three members voting for a hold would signal the committee sees inflation under control and the economy too weak for tighter money. A unanimous vote for a hike would signal the opposite.

The rand at R16,24 is roughly where it sat through the first half of September. The question is whether it holds there once the Fed’s decision is known and the market turns to South Africa’s own numbers.

Source: IOL, Asian stocks stutter, rand steady and oil softer as markets brace for US Fed decision, published 16 September 2026.