Rand slips ahead of rate decision as trade fears weigh

By Staff Reporter Time of article published Jul 17, 2019

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JOHANNESBURG - South Africa’s rand slipped against a firm dollar on Wednesday, as investors held off big trades a day ahead of a central bank rate decision.

The rand stood at 13.97 verses the greenback by 0558 GMT, a 0.13% decline compared with Tuesday’s close.

The mood across emerging markets was not helped by U.S. President Donald Trump’s threat to put tariffs on another $325 billion of Chinese goods.

South African government bonds were also slightly weaker, with the yield on the benchmark 2026 instrument rising 1.5 basis points to 8.040%. 

The monetary policy committee (MPC) of the SA Reserve Bank (Sarb) is widely expected to cut interest rates by at least 25 basis points for the first time since March 2018 on weak economic growth, subdued inflation and the dovish global monetary climate. 

Inflation rose to 4.5 percent in May from 4.4 percent in the prior month, but still in the mid-point of the Sarb’s target range of 3 to 6 percent. Bank of America Merrill Lynch said its researchers had pencilled in the 25 basis point cut to be followed by two cuts in September and January. 

“The rand stands to benefit disproportionately from risk-in emerging markets (EMs). Real 10-year yields based on core inflation is 5 percent, the highest since 2011 and substantially above many major EM peers,” Merrill Lynch said. 


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