Rand weakens as inflation quickens

Comment on this story
NewRandMoney Reuters.

Cape Town - The rand weakened for a second day after inflation accelerated more than expected in Africa’s biggest economy and as violence in Ukraine and Thailand soured investor sentiment toward emerging markets.

South African consumer prices climbed for a second month to 5.8 percent in January from 5.4 percent the month before.

The median estimate of 24 economists in a Bloomberg survey was 5.7 percent.

The advance probably won’t be enough to prompt a second interest-rate increase from the South African Reserve Bank, which unexpectedly lifted borrowing costs on January 29, according to the Royal Bank of Scotland Plc.

“The Reserve Bank would be reluctant to choke off the little growth that is left in the economy,” Abbas Ameli-Renani, a London-based emerging-markets strategist at the lender, said in an e-mail.

“The currency, meanwhile, remains vulnerable. South Africa offers the least amount of real yield in the entire emerging-market space.”

The rand weakened 0.6 percent to 10.9450 per dollar by 10:57 a.m. in Johannesburg.

Yields on benchmark bonds due December 2026 were little changed at 8.6 percent after falling four basis points, or 0.04 percentage point, yesterday.

The dollar gained against 15 of 24 emerging-market currencies tracked by Bloomberg after clashes between police and anti-government activists in Kiev left at least 25 people dead.

In Bangkok, five people died in clashes between police and protesters.

The hryvnia fell to a five-year low while the bhat retreated a second straight day.

South African police are probing the death of a man and looting of shops owned by foreigners in a township near Johannesburg.

“Escalating violence in Ukraine and Thailand hasn’t helped” emerging-market currencies, John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in a client note.

The release of minutes from the Federal Reserve’s last policy meeting also poses a risk to the rand, he said.

International investors bought a net 438 million rand ($40 million) of South African bonds yesterday, paring outflows this year to 17.9 billion rand, according to JSE Ltd. data. - Bloomberg News

sign up

Comment Guidelines

  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

  5. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles. You are only required to verify your email address once to have full access to commenting on articles. For more information please read our comment guidelines