The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko
JOHANNESBURG - The Rand weakened yesterday, giving back gains that lifted it to its firmest level in two-and-a-half years as caution crept back into the market and some investors held off extending long positions.

At 4.30pm, the rand was 0.26percent weaker at R12.3025 to the dollar compared to its close overnight in New York, although it pared some losses to R12.2666 after retail sales data for November showed its largest increase in five years.

The SA Reserve Bank (SARB) will decide on lending rates today, with economists forecasting rates unchanged at 6.75percent but forward markets pricing a slightly more than 50percent chance of cut by 25 basis points.

“Notwithstanding the positive retail sales surprise, growth is still weak, below potential. This is reason enough for the SARB to lend some near-term support to growth, and cut the repo rate in January,” said Razia Khan, chief economist for Africa at Standard Chartered.

Bonds were weaker, with the yield on the benchmark paper due in 2026 adding 1 basis point to 8.485percent.

Meanwhile, the stock market gained, boosted by retail data and extended the previous session’s rally.

The all share index reached a record high of 61309 points in mid-day trade before paring gains to close 0.45percent higher at 60924.46 points. The Top40 index climbed 0.54percent to 54068.84 points.

The signs of better than expected economic recovery cheered retail stocks.

Supermarket chain Choppies rose 7.14percent to R3.30, food retailer Shoprite climbed 4.99percent to R230.97, and Massmart jumped 4.49percent to R140.

“Today’s figures suggest that consumer spending will make a strong contribution to economic growth in the fourth quarter,” said Nedbank Group economic analysts in a note referring to the retail sales numbers.

On the Wall Street, main indices were lifted by modest gains in technology stocks in afternoon trade, led by Microsoft, IBM and Intel.

At 4.35pm, the Dow Jones industrial average was up 0.4percent at 25895.38 points, the S&P500 had climbed 0.22percent at 2782.61 points and the Nasdaq Composite had gained 0.28percent at 7243.87 points.