World Markets

South African rand pauses after inflation-inspired rally

Credit: REUTERS/SIPHIWE SIBEKO1

The South African rand paused early on Thursday after surging a day earlier when inflation figures bolstered the case for the central bank to raise interest rates next week.

JOHANNESBURG, Jan 20 (Reuters) - The South African rand paused early on Thursday after surging a day earlier when inflation figures bolstered the case for the central bank to raise interest rates next week.

At 0714 GMT, the rand ZAR=D3 traded at 15.3300 against the dollar, unchanged from its previous close. On Wednesday it strengthened over 1%.

"The market has adjusted its pricing of implied rate hikes in South Africa somewhat aggressively in recent weeks," ETM Analytics said in a research note.

"The risk to the rand going forward is that the South African Reserve Bank (SARB) disappoints by hiking less than the market is positioned for, with the prospect of easing supply-side inflation through 2022 and a flagging economy."

The SARB's first rate decision of 2022 is due on Jan. 27, with economists polled by Reuters predicting a 25 basis point increase in the repo rate ZAREPO=ECI to 4.00%.

Last year the SARB lagged some other emerging market central banks like those of Russia and Brazil in raising rates, but it increased them by 25 basis points at the last monetary policy meeting of 2021 in November - its first hike in three years.

On the Johannesburg Stock Exchange, the Top-40 .JTOPI index was up 0.8% in early trade. The government's benchmark 2030 bond ZAR2030= was a fraction weaker, with the yield rising 0.5 basis points to 9.375%.

(Reporting by Alexander Winning; Editing by Simon Cameron-Moore)

((alexander.winning@tr.com; +27 10 346 1076))

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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