Rand firm ahead of inflation data

The rand firmed early on Wednesday before the publication of local consumer inflation data that was expected to provide clues on the next interest rate move.

At 0630 GMT the rand was 0.1% stronger at 14.39 per dollar, retreating slightly from an overnight best of 14.28 as investors took a cautious approach, with technical resistance at 14.20 the next target.

“The target of 14.20 was just out of touch but if you had sold the rallies to 14.45 then the move to 14.28 yesterday afternoon provided a fair bit of return,” said Standard Bank’s chief currency trader Warrick Butler in a note.

After sliding to a two-year low of 15.70 last week as the Turkish crisis triggered a broad flight from emerging markets, the rand has regained some ground, advancing around 8% in the last seven days as the greenback’s rally faltered.

Consumer inflation figures for July due at 0800 GMT are expected to show prices rose again. Analysts polled by Reuters expect year-on-year price-growth at 5% from 4.6% in June.

Traders said a higher than consensus print would offset the carry-trade attraction, triggering some short-term currency losses, but the increasing likelihood of rate hikes by the Reserve Bank would lure yield-seeking foreign investors.

“If the rand trades back above 14.60 then I fear we may see a continuation of the precious week’s nervousness,” Butler said.

Bonds were slightly firmer, with the yield on the benchmark 2026 paper down 0.5 basis points to 8.98%.

Stocks were set to open a touch lower at 0700 GMT, with the Johannesburg Stock Exchange’s Top 40 Futures Index down 0.1%.