Rand rallies to a three-week high before rates decision

The rand rallied to a three-week high against the dollar on Thursday morning, outperforming its emerging-market peers.

The strong push in the value of the rand comes just hours before the Reserve Bank delivers its keenly awaited decision on interest rates.

Economists say the latest benign inflation figures could tip the scales in favour of a no change in monetary stance — at least for now.

The Bank is caught between a rock and a hard place, with a rising inflation on the one hand, and weak growth on the other.

Although inflation grew at a slower rate of 4.9% in August on a year-on-year basis, slowing from 5.1% in July, economists expect it to rise towards the upper end of the Bank’s 3%-6% target range in coming months.

The lower than expected inflation figures for August also boosted the appeal of local bonds from a real return point of view, which strips out inflation.

The yield on the benchmark R186 dropped to 9.04%, its lowest level in about three weeks, from 9.10% at its last settlement.

Other emerging-market currencies were mostly stronger in early trade, from the Turkish lira to the Thai baht and the Indian rupee, showing signs of stability after a recent bout of volatility.

At 9.42am, the rand was at R14.4853 to the dollar, from R14.6376. It was at R16.9478 to the euro from R17.0856, and at R19.0853 to the pound from R19.2390. The euro was at $1.1701 from $1.1672.