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Johannesburg - The rand was on track for its biggest weekly loss since mid-December on Friday as the local market scales back expectations of higher domestic rates this year.
Government bonds strengthened further, pushing yields lower, after consumer inflation came in less than expected this week, suggesting the Reserve Bank will have leeway to keep rates at their lowest level in 30 years for longer.
All 24 economists polled by Reuters on Friday expect the Reserve Bank’s Monetary Policy Committee to keep the key repo rate unchanged at 5.5% next Thursday, with 12 seeing no change throughout 2012.
After losses earlier in the week, the rand was largely steady against the dollar in quiet Friday trade, down 0.12% at R7.7215/$ in early evening trade.
A close at these levels would shave nearly 2% off the local currency’s value this week, reversing some of its recent gains.
“A lot of the rand’s gains last week were based on the hawkish message from (central bank Governor Gill) Marcus, but since the February CPI release, markets are less certain that a rate hike will be delivered at the end of the year,” said Christopher Shiells, emerging market analyst at Informa Global Markets.
Markets moved to price in a higher chance of a rise in rates after Marcus said last week inflation pressures were becoming more generalised, with more evidence of pressure from the demand-side of the economy.
But data this week showed CPI braked unexpectedly to 6.1% year-on-year in February from 6.3% in January. Government bonds have rallied on the data, with yields extending losses on Friday.
The yield on the benchmark three-year bond closed six basis points lower at 6.83% and that for the 14-year paper shed 5.5 basis points to 8.46%.
Government bonds strengthened further, pushing yields lower, after consumer inflation came in less than expected this week, suggesting the Reserve Bank will have leeway to keep rates at their lowest level in 30 years for longer.
All 24 economists polled by Reuters on Friday expect the Reserve Bank’s Monetary Policy Committee to keep the key repo rate unchanged at 5.5% next Thursday, with 12 seeing no change throughout 2012.
After losses earlier in the week, the rand was largely steady against the dollar in quiet Friday trade, down 0.12% at R7.7215/$ in early evening trade.
A close at these levels would shave nearly 2% off the local currency’s value this week, reversing some of its recent gains.
“A lot of the rand’s gains last week were based on the hawkish message from (central bank Governor Gill) Marcus, but since the February CPI release, markets are less certain that a rate hike will be delivered at the end of the year,” said Christopher Shiells, emerging market analyst at Informa Global Markets.
Markets moved to price in a higher chance of a rise in rates after Marcus said last week inflation pressures were becoming more generalised, with more evidence of pressure from the demand-side of the economy.
But data this week showed CPI braked unexpectedly to 6.1% year-on-year in February from 6.3% in January. Government bonds have rallied on the data, with yields extending losses on Friday.
The yield on the benchmark three-year bond closed six basis points lower at 6.83% and that for the 14-year paper shed 5.5 basis points to 8.46%.
