In partnership with
All data is delayed
Loading...
See More

Rand rallies on Sarb rate hike

Mar 17 2016 18:37

Cape Town - The rand rallied to under R15.10/$ on Thursday after Reserve Bank governor Lesetja Kganyago announced a 25 basis-point increase in the repurchase rate to 7%, citing upside risks to the inflation forecast and the protracted period of the expected breach of the inflation band.

The Sarb's targeting range for inflation is between 3% and 6%. Consumer inflation breached the ceiling last month when it rose to 118 index points.

By 16:20 the rand traded at R15.08/$ from R16.20 the same time on Wednesday following another bout of political turmoil.

The admission by Deputy Finance Minister Mcebisi Jonas that he was offered the position of finance minster by a member of the Gupta family opens the deep wounds and fissures surrounding leadership and governance in South Africa.

"What a wild ride, this time yesterday we were at 16.20 and now we're trading under 15.20. A dovish fed gave impetus to risk asset to move lower and the rand lapped it all up along with other emerging markets.

"The rand wasn't done there as interest rates were unexpectedly hiked and it looks like international markets are taking a liking to the additional yield pick up," said Wichard Cilliers, chief dealer at TreasuryOne.

Kganyago said the Sarb is expecting inflation to remain above 6% for an extended period, perhaps until 2018.

He cited food inflation as the main culprit of inflation breach.

The repo rate is the rate at which the Sarb lends money to commercial banks, which in turn charges consumers a prime lending rate. The latest increase took the prime lending rate to 10.5%.

Cilliers said the big move of the day has been caused by the US Fed meeting on Wednesday night, stating that they will look at the economy to recover further before they hike.

"This has pushed the hike expectations out further into 2016. This has helped emerging market currencies. Oil and other commodities also jumped around 2% higher.

"All the political risk will still weigh on the ZAR, but for now in the short term the ZAR has taken a breather thanks to the US," he said.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest. 24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

sarb  |  markets  |  currencies  |  rand

NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.
 

Company Snapshot

We're talking about: SMALL BUSINESS

From fossils to finance – that’s been the career trajectory of Dr Merrill van der Walt, a palaeontologist until recently. She is now a statistician with a difference.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

SA's avoidance of junk status by rating agencies: Moody's and Fitch

Previous results · Suggest a vote

Loading...