World Markets

South African rand firms as central bank keeps rates on hold

Credit: REUTERS/THOMAS WHITE

South Africa's rand firmed on Thursday, supported by a weaker dollar and the central bank's decision to keep the repo rate unchanged, while stocks edged lower.

Rewrites throughout, adds stocks

JOHANNESBURG, Nov 21 (Reuters) - South Africa's rand firmed on Thursday, supported by a weaker dollar and the central bank's decision to keep the repo rate unchanged, while stocks edged lower.

The U.S. dollar eased against other major currencies, with investors focused on the latest developments in a 16-month long trade dispute between the United States and China that has weighed on the world economy.FRX/

At 1650 GMT the rand ZAR=D3 was 0.59% firmer at 14.7000 per dollar.

The currency touched a session high of 14.6410 after the central bank kept the repo rate at 6.5% in a close decision. The bank said it wanted to see inflation expectations closer to the midpoint of its target range, despite a sustained drop in headline inflation.

"The decision was not surprising against the backdrop of elevated inflation risks in both domestic and global economies," Nedbank analysts said in a note.

"A further improvement of inflation expectations would boost chances of a cut in January and this could be helped by another low headline CPI figure in December," the Nedbank analysts said. "However, the proximity of the National Budget in February 2020 may prevent an early cut."

On the stock market, stocks fell alongside other emerging market equities after as a diplomatic row between the United States and China sparked fears of a delay to a deal to end a trade war that has dented global growth and unsettled financial markets.

The benchmark JSE Top-40 Index fell 1.44% to 50,235.68 points while the broader All-Share Index fell 1.35% to 56,540.25 points.

Financials took the biggest tumble on the blue-chip index, with insurance and financial services company Discovery DSYJ.J down 4.4% at 128.75 rand and Absa Group ABGJ.J down 4.08% at 158.53 rand.

Preventing further losses was retailer Mr Price Group MRPJ.J which shot up 11.25% to the top of the index after reporting total revenue growth of 2.6% even though profits were down 10% because of the weak economy and an imbalance in product ranges.

In fixed income, the yield on the benchmark 2026 bond ZAR186= added 2.5 basis points to 8.33%.

(Reporting by Olivia Kumwenda-Mtambo and Naledi Mashishi. Editing by Jane Merriman)

((Olivia.Kumwenda@thomsonreuters.com; +27 11 595 2817; Reuters Messaging: olivia.kumwenda.thomsonreuters.com@reuters.net))

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