JOHANNESBURG: South Africa's rand strengthened more than two percent to its strongest level this year on Wednesday as higher-than-expected inflation bolstered the case for further interest rate hikes.
Stocks also ended higher, with Glencore among the biggest gainers after the mining heavyweight raised money to pay down debt.
Consumer inflation quickened to 6.2 percent year-on-year in January, breaching the central bank's target range compared with 5.2 percent in December.
At 1623 GMT the local unit was trading at 15.48 to the dollar, up 1.95 percent compared with Tuesday's close and the firmest since Dec. 30 last year.
"What the rand is telling us is that markets would be open for more aggressive interest rate increases," said ETM Analytics market analyst Jana van Deventer.
"Such interest rate increases would ultimately provide a buoying to the currency because it helps to restore the imbalances in the domestic economy and will help in attracting foreign capital."
Bonds tracked the stronger currency, with the benchmark issue due in 2026 shedding 4 basis point to 9.105 percent.
On the equities market, stocks ended higher with Glencore gaining 11.73 percent to 26.19 rand, a level last seen in November last year.
Glencore, which is also listed in London, raised $8.4 billion in commitments as part of an early refinancing of its short-term debt.
"The market has taken it well. It's demonstrated that they are able to secure debt in this challenged environment," Investec analyst Marc Elliott said.
Overall, traders took their cue from major overseas markets on hopes that top oil producers will convince Iran to agree to a production freeze.
The blue-chip JSE Top-40 index gained 1.46 percent to 44,591 and the broader All-share index added 1.3 percent to 50,039.
On the downside, Discovery slumped more than 5 percent to 115.45 rand after the insurer said half-year profit growth slowed.
Trade was active with more than 333 million shares changing hands, above last year's daily average of 296 million shares.
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