South Africa's rand firms after CPI data, stocks down

JOHANNESBURG: South Africa's rand firmed on Wednesday as data showing consumer price inflation slowed in February did little to change market expectations that the central bank will not cut interest rates any further.

At 1540 GMT, the rand was trading at 14.8400 against the dollar, 0.24% firmer than its previous close.

The currency rallied to a session best of 14.7550 earlier after Statistics South Africa said consumer inflation slowed to 2.9% in February, its lowest in eight months, dipping below the central bank's target range just a day before the regulator decides on lending rates.

But the lower CPI print didn't dampen market expectations that the central bank will keep rates on hold on Thursday - a decision that would help maintain South African assets carry-trade appeal.

"We think that the repo rate will remain unchanged at 3.50% for longer than most currently anticipate," said Virág Fórizs, Africa economist at Capital Economics.

"Underlying price pressures will probably remain subdued as South Africa's economic recovery struggles to gain momentum."

Stocks dipped sharply in early trade following global cues that a third wave of coronavirus was slowly firming up across regions. However, results from Chinese tech-giant Tencent Holdings, which has a strong co-relation with index heavyweight Naspers Ltd, provided some relief.

The benchmark all-share index closed 0.09% down at 65,257 points and the bluechip top 40 companies index closed down 0.04% at 59,769 points.

"The market is currently running on fumes," said Cameron Macklin, sales trade at Avior Capital Markets, adding that any bit of negative news pulls the stock down.

With Germany, considered the gold standard among European countries, signalling a hard lockdown and the problems of vaccine availability bore heavy on the local stocks, he said.

Government bonds weakened, with the yield on the benchmark 2030 government issue up 7.5 basis points to 9.44%.