South African rand falls after rate decision; stocks down

The rand fell against the dollar on Thursday after the central bank left interest rates unchanged and sounded less hawkish, citing an improved inflation outlook.

Stocks closed lower, led by a slump in retailers after poor sales updates from Mr Price, Woolworths and Truworths.

At 1522 GMT, the rand traded at R13.80 per dollar, 0.77% weaker than its close of R13.69 on Wednesday. It hit a session low of R13.83 and a high of R13.65.

South Africa’s central bank kept its benchmark repo rate unchanged at 6.75%, as expected, saying it had noted an improved inflation outlook.

Analysts said the Reserve Bank’s inflation outlook has reduced the likelihood of future interest rates increases, putting pressure on the rand.

“South African policymakers’ abrupt shift away from their previous hawkish rhetoric suggests that further rate hikes are now unlikely,” said John Ashbourne, senior emerging markets economist at Capital Economics. “If anything, today’s speech raises the possibility that the cut will come sooner.”

In fixed income, the yield on the benchmark government bond due in 2026 added 2 basis points to 8.8%.

On the stock market, the Top 40 index fell 0.88% to 47,298. The broader all-share index fell 0.65% to 53,436.

Mr Price led declines on the blue-chip index, tumbling 16.69% to R215.60 after it reported a slowdown in sales growth and warned of a challenging final quarter.

Shares in Woolworths fell nearly 10% to R49.44. The department store operator posted slower half-year sales growth and said it expected its headline earnings to drop by 5% in the period.

Truworths also suffered heavy losses, declining more than 9% to R80.70, after saying it was likely to report a drop in first-half headline earnings.