Rand weakens after inflation, retail sales data

The South African rand weakened against the dollar on Wednesday, after inflation held steady at the top of the central bank’s target range and retail sales numbers disappointed, a day before the central bank announces its interest-rate decision.

By 20:29, the rand traded at 16.0201 against the dollar, 0.63% weaker than its previous close.

In April, consumer price inflation remained at a five-year high of 5.9%, in line with a Reuters poll and just within the central bank’s 3%-6% target range, according to data published by Statistics South Africa earlier on Wednesday.

Read: CPI: Inflation steady as big interest-rate hike looms

Retail sales rose 1.3% year-on-year in March, slightly below expectations of 1.5% and a 0.3% fall from February, according to data also published on Wednesday by the statistics agency.

“March’s modest reading evinces the financial pressure many households are still facing in the current economic environment,” Investec economist Lara Hodes said in a note.

“An expected higher interest rate and cost environment is clearly suppressing sentiment.”

A stronger dollar also weighed on riskier assets worldwide, including the rand.

On the Johannesburg Stock Exchange (JSE), the All-Share index ended down 0.88% at 69,083 and the blue-chip index of top-40 companies closed down 0.84% at 62,494 points, driven by a fall in resources companies.

Tech stocks on JSE also closed lower, including index heavyweight Naspers, which closed down almost 5%, while its subsidiary Prosus ended down over 3%.

Read: Tencent disappoints after lockdowns, crackdown wipe out growth

Investors now await the South African Reserve Bank’s monetary policy decision, due on Thursday.

A Reuters poll published on Friday forecast the bank would make its first 50 basis-point repo rate hike in more than six years, taking it to 4.75%, to prevent potential second-round effects from higher consumer prices.

In fixed income, the yield on the benchmark 2030 government bond dipped two basis points to 9.980%.