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Rand weakens after inflation jumps

Jan 21 2016 10:27

Johannesburg - The rand sank on Thursday, pressured by data that showed inflation had jumped in December and which was released a week before the South African Reserve Bank (Sarb) is due to decide on interest rates at its first 2016 policy meeting.

At 08:45 the rand had slipped 0.6% to R16.8500/$, edging closer to the psychologically crucial R17.00 mark it breached on January 10 on its way to an all-time low of R17.9950.

The JSE's Top 40 futures index was up 0.4%, suggesting the local bourse would open slightly higher.

Yields on government bonds inched lower, shedding 2.5 basis points to 9.68%.

Data released on Wednesday showed headline inflation had jumped to 5.2% in December from 4.8% in the previous month, spurring Sarb governor Lesetja Kganyago to concede that the inflation outlook has deteriorated since the bank's last meeting.

READ: Inflation hits highest level for year

The bank raised benchmark lending rates by a total of 50 basis points in 2015, and some analysts predicted another rate increase.

"There is very good chance that the monetary policy committee will be forced to act. We expect an interest rate hike that may be as large as 50 basis points," said analysts at research house NKC African Economics.

A report by Washington-based Institute of International Finance, which tracks international investment flows, warned on Wednesday that South Africa along with Brics partner Brazil was among the countries most vulnerable to large investment outflows due to slowing growth in China and poor fundamentals.

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rand  |  markets  |  currencies


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