Rand firms; eyes on Reserve Bank this week

The rand firmed against a weaker dollar on Tuesday, as investors awaited the central bank’s decision on monetary policy later this week.

At 09:00, the rand traded at R17.18 against the dollar.

The South African Reserve Bank (Sarb) will announce its rate decision on Thursday, with 11 of the 20 economists polled by Reuters predicting a 50 basis point (bps) hike to 7.50%. Eight projected a 25 bps increase and one no change.

The rand will likely continue to trade at around R17.20 per dollar until the Sarb’s decision is known, ETM Analytics said in a note.

Data last week showed December consumer inflation slowed to 7.2% year-on-year from 7.4% the previous month, in line with analysts’ forecasts but still well above the central bank’s 3%-6% target range.

Most economists polled by Reuters see no further rate hikes after this week.

“Arguably more important than the decision itself will be the guidance offered on whether the Sarb will turn sensitive to growth if inflation does turn sharply lower and re-enters the target band in the months ahead,” ETM Analytics said.

The government’s benchmark 2030 bond was slightly weaker in early deals, with the yield up 2 basis points to 9.800%.

Source: moneyweb.co.za