JOHANNESBURG - The Rand climbed against every single G10 currency on Thursday afternoon despite the South African Reserve Bank (SARB) cutting interest rates for the first time since March 2018.
According to Lukman Otunuga, Research Analyst at FXTM, in a unanimous decision, the central bank cut interest rates by 25 bp to 6.5%.
Otunuga said, "Although a reduction in rates has the potential to reduce the attractiveness of South African financial assets, it could support the economy. Market optimism over lower interest rates stimulating consumption which remains a key engine of growth is likely to boost appetite for the Rand. Buying sentiment towards the Rand has jumped this afternoon with the local currency gaining 0.5% against the Dollar. The USDZAR could challenge R13.84 if R13.90 proves to be an unreliable support.
Following the South African Reserve Bank’s (SARB) decision today to reduce its repo rate by 0.25%, FNB confirmed that it will reduce its prime lending rate from 10.25% to 10% with effect from Friday, 19 July. The lower rate applies to all prime-linked loans.
Jacques Celliers, CEO of FNB, says “Today’s rate cut is expected to bring some relief to consumers who have been under pressure during the last few months. Following a contraction in GDP during the first quarter, we look forward to improved conditions later in the year based on expectations of a good rebound and this, coupled with lower interest rates, may aid the anticipated recovery.”
Jacques du Toit, Property Analyst at Absa Home Loans, said, "As a result of the cut in the repo rate, Absa announced that its prime lending and variable mortgage interest rates will be lowered from 10,25% to 10,00% per annum, effective from 19 July 2019."
BUSINESS REPORT ONLINE