World Markets

South African rand dips on stronger dollar, stocks up

Credit: REUTERS/THOMAS WHITE

South Africa's rand weakened on Thursday as the dollar gained after the Federal Reserve said it would roll out an aggressive new strategy that aims to lift U.S. employment and inflation.

Updates prices, stocks

JOHANNESBURG, Aug 27 (Reuters) - South Africa's rand weakened on Thursday as the dollar gained after the Federal Reserve said it would roll out an aggressive new strategy that aims to lift U.S. employment and inflation.

At 1515 GMT, the rand ZAR=D3 traded at 17.0450 versus the dollar, 1.04% weaker than its previous close.

U.S. Federal Reserve Chairman Jerome Powell laid out a policy that will seek to achieve inflation averaging 2% over time and offset below -2% periods with higher inflation "for some time."

The rand's weakness also comes as the latest local consumer and producer inflation figures show an uptick in prices, but not by enough to dampen expectations of further monetary policy easing.

"If the Q2 GDP print comes in close to our estimation of an annualised contraction of nearly 55% q-o-q, the South African Reserve Bank could feel compelled to loosen policy further," Jacques Nel, an analyst at NKC African Economics said in a note.

"However, that would be a symbolic cut with little impact on the country's overall growth prospects and runs the risk of putting further pressure on South African capital markets."

The South African Reserve Bank has already cut rates by 300 basis points this year in response to a collapse in inflation and weak economic projections linked to the COVID-19 pandemic.

The stock market was propelled by a raft of local results with the benchmark FTSE/JSE all share index .JALSHclosing up 0.53% to 56,870 points while the FTSE/JSE top 40 companies index .JTOPI ended 0.63% up to 52,584 points.

South African retailer Massmart MSMJ.J shot up by over 12% on Thursday on positive management commentary while Blue Label Telecom Ltd BLUJ.J, owner of service provider Cell C, jumped over 11% as market looked past its poor results.

Mining major Sibanye Stillwater Ltd SSWJ.J closed up over 3% as profits boosted its share price.

Government bonds were a touch weaker, with the yield on the 2030 bond ZAR2030= rising by 0.5 basis points to 9.3%.

(Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Lisa Shumaker)

((Olivia.Kumwenda@thomsonreuters.com; +27 10 346 1084;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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