Rand whipsaws after J&J vaccine setback
JOHANNESBURG – The rand lost ground in cautious trade as risk sentiment soured after news broke that the US Centers for Disease Control and the US Food and Drug Administration recommended pausing the distribution of the Johnson & Johnson (J&J) vaccine in the US due to issues with blood clotting.
Health Minister Zweli Mkhize announced a temporary pause of J&J vaccine roll-out. However, the rand rebounded quickly as the trade-weighted dollar was clipped by the US CPI release as the reading came in only marginally above expectations, alleviating concerns that higher price growth will fuel increases in US yields.
Boosted by a jump in energy prices, headline consumer prices advanced 0.6 percent m-o-m (month over month), the fastest monthly clip since August 2012. A sharp rise in gasoline prices accounted for about half of the gain. Core CPI increased stronger-than-forecast, rising 0.3 percent m-o-m.
Boosted by strong base effects, the y-o-y (year over year) pace for overall CPI accelerated sharply to 2.6 percent from 1.7 percent in February, while the rate for core CPI advanced to 1.6 percent from 1.3 percent the previous month.
In the coming months, ongoing base effects and one-time price increases stemming from the reopening of the economy and some pass-through of higher prices from supply chain bottlenecks should continue to boost the pace of inflation to 3.5 percent year-on-year.
However, NKC African Economics shares the Fed’s view that the acceleration in inflation will be transitory and will not represent the start of an upward inflationary spiral.
At the close of local trade, the rand quoted 0.14 percent stronger at R14.57/$, after trading in the range of R14.54/$ – R14.68/$. The rand traded stronger overnight. The expected range of the rand against the dollar today is R14.20/$ – R14.60/$.
BUSINESS REPORT ONLINE