CAPE TOWN - South Africa’s rand breached its weakest closing level on record on Wednesday as investors priced in the probability of a central-bank rate cut amid the global risk sell-off.
The currency of Africa’s most-industrialised country weakened as much as 2.5% to 17.0396 per dollar, surpassing the 16.8717 closing level of January 18, 2016.
It’s still some way off the intraday weakest level of 17.9169 reached during a “flash crash” in Asian trading hours that same month.
Money markets are pricing in 53 basis points of easing by the South African Reserve Bank on Thursday, even after data showed consumer inflation climbed above the 4.5% midpoint of the target range for the first time in 15 months in February. The plunge in oil prices should moderate price increases in March.
South Africa’s rand breached its weakest closing level on record on Wednesday as investors priced in the probability of a central-bank rate cut amid the global risk sell-off. Image: Bloomberg. Earlier today, annual inflation rate rose above the midpoint of the central bank’s target range for the first time in 15 months in February driven by higher fuel prices.
Consumer prices increased 4.6% from a year earlier compared with 4.5% in January, Pretoria-based Statistics South Africa said Wednesday in a statement on its website.
The median estimate of 16 economists in a Bloomberg survey was 4.5%. Prices rose 1% from January, the highest monthly rate since February 2017.
The uptick is unlikely to deter the central bank from cutting the benchmark interest rate on Thursday. More than half of the 21 economists in a Bloomberg survey predict a 50 basis-point reduction. Bets on easing increased after President Cyril Ramaphosa declared a national state of disaster over the coronavirus pandemic and the U.S. Federal Reserve lowered its main rate to almost zero.