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South Africa’s rand retreats ahead of lending rates decision

South Africa’s rand retreats ahead of lending rates decision

JOHANNESBURG: South Africa’s rand opened weaker on Thursday, stepping back from a recent rally as traders cleared positions ahead of a lending rates decision by the central bank later in the session.

At 0730 GMT the rand was 0.75 percent weaker at 13.3575 per dollar, compared with a close of 13.2575 overnight in New York.

The rand staged a surprise rally for most of July, outshining its emerging market peers as it leapt to a one-month peak, mostly on carry trade plays with investors attracted by the return offered by benign inflation and relatively high interest rates.

“You can’t read too much into this morning’s move. It’s mostly guys clearing positions ahead of the lending rates decision later on,” said Mehul Daya, a currency strategist at Nedbank.

All 25 economists polled by Reuters last week expect South Africa’s Reserve Bank (SARB) to hold rates at 6.5 percent on Thursday.

“Inflation is not a massive worry to the markets. If the SARB holds rates as expected it will probably bode well for the rand, because that means real rates remain attractive for investors, ” Daya said.

Headline consumer inflation quickened to 4.6 percent year-on-year in June, data on Wednesday showed. The figures remains well within the central bank’s target of between 3 and 6 percent.

Bonds were also weaker, with the yield on the benchmark paper due in 2026 adding 3 basis points at 8.71 percent.

Stocks opened slightly firmer, with the Johannesburg Stock Exchange Top 40 futures index up 0.4 percent to 49,978 points.

Copyright Reuters, 2018

Source: Brecorder

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