JOHANNESBURG - The rand firmed against the dollar yesterday, gaining 0.11 percent to R14.86 after latest data showed consumer inflation rate slowed to an eight-month low in February.
Inflation fell to 2.9 percent from 3.2 percent in January, dipping below the central bank's target range of 3 to 6 percent just a day before the SA Reserve Bank's monetary policy decision.
The central bank's monetary policy meeting is widely expected to keep interest rates unchanged at 3.5 percent after cutting rates aggressively last year to shore up the economy.
The prime lending rate has been at a level of 7 percent since July last year following a cumulative 300 basis points reduction in support of the pandemic-hit economy.
Analysts last week indicated expectations that the Reserve Bank would keep lending rates on hold this week.
TreasuryONE economist Andre Cilliers said they expected no change in interest rates. However, he said risk aversion had returned to the markets after the rand closed at R14.90 on Tuesday, above the R14.85 technical level.
“Risk aversion has crept back into markets as the third wave fears hit Europe, political tensions between China and the West rise along with possible further tax hikes in the US push investors back to the safety of the dollar,” Cilliers said.
“The rand could weaken further in the short term and a move back above R15 is not out of the question.”
Meanwhile, stocks on the JSE fell for the third consecutive day as predictions of a sooner-than-anticipated third wave of Covid-19 raised concerns about possible new lockdowns restrictions. The JSE All Share Index in South Africa fell 0.09 percent to 65 257 points, its lowest level since February 8, dragged by the decline in banks, retailers, and mining stocks.
Market sentiment was tempered by concerns over the pace of South Africa's vaccination rollout as just more than 190 000 health-care workers have been vaccinated. The Medical Research Council yesterday warned that a third wave of Covid-19 was coming in the next few weeks, particularly after the Easter weekend.
Significant risks lie ahead for the economy with the prospect of a third wave looming amid a very slow vaccine rollout, and renewed lockdown restrictions could hamper the country's fragile recovery. SA Reserve Bank Governor Lesetja Kganyago said that the bank had scope to respond with further support should a third wave of Covid-19 infections hit South Africa this year.
BUSINESS REPORT