Rand firms notably as inflation slows in July
The rand was firmer on Wednesday afternoon after better-than-expected consumer inflation for July gave support to the view that the SA Reserve Bank may cut interests further in 2019.
Consumer price inflation for July eased to 4% year on year from 4.5% in the previous month and below market expectations of 4.3%, according to a Bloomberg poll. The data supports the view by some economists that the Bank will move to cut rates in order to stimulate economic activity, which is likely to have a positive effect on the rand.
The Bank has, however, highlighted the risk of the further depreciation in the rand which may constrain its ability to lower rates. Its next monetary policy committee (MPC) meeting is scheduled for September 17-19.
London-based emerging-markets analyst at Rabobank, Piotr Matys said the Bank faced a “significant dilemma” and may have to wait for global market sentiment to improve.
“It’s going to be difficult for the rand to regain bullish momentum considering the likelihood of a prolonged trade war … we are very sceptical that we are going to witness any breakthrough in trade talks in the coming months and do not expect sustainable improvement in market sentiment towards risky assets anytime soon.”
The latest inflation figures come just hours before the US Federal Reserve is set to publish its latest meeting’s minutes, with investors betting on the likelihood that the Fed will loosen monetary policy further in the coming months.
At 3.01pm, the rand had firmed 1.33% to R15.1624/$, 1.31% to R16.8347/€ and 1.57% to R18.4072/£. The euro was flat at $1.1103. Gold was down 0.52% to $1,499.80/oz while platinum had edged up 0.25% to $851.07.
Source: businesslive.co.za