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#RandReport: Rand recovers from 5-month lows

The rand’s recovery came as data showed domestic producer price inflation quickened more than expected in August, but remained below the central bank’s upper inflation target range of 3 to 6%.

Picture: Supplied

JOHANNESBURG - The rand recovered from five-month lows against the dollar in late trade on Thursday as the greenback paused its recent rally triggered by hawkish rhetoric by the US Federal Reserve.

At 1504 GMT, the rand traded at R13.5350 per dollar, 0.42% firmer than its New York close on Wednesday.

The currency had hit R13.7100/dollar earlier in the session, its weakest level since 9 May, as it extended losses from previous sessions after comments by Fed Chair Janet Yellen on Tuesday emphasised the need to continue with rate hikes.

The rand’s recovery came as data showed domestic producer price inflation quickened more than expected in August, but remained below the central bank’s upper inflation target range of 3 to 6%.

But despite inflation being anchored within the central bank’s range, analysts expect a volatile rand and political risks to keep the South African Reserve Bank from cutting interest rates again this year.

“The outlooks for both producer and consumer inflation are still favourable with both expected to be below the Reserve Bank’s upper target range for the remainder of the year,” Nedbank analysts said in a note.

“However, rand volatility ahead of the (African National Congress’) elective conference in December will reduce the chances of an early reduction.”

The ruling ANC will pick a new party leader in December to succeed scandal-tinged President Jacob Zuma. But Zuma can remain head of state until a parliamentary election in 2019.

In the equity market, the Johannesburg All-Share index weakened 0.4% to 54,994 points, while the Top-40 index fell 0.36% to 48,842 points.

Weighing on the bourse were mining stocks as commodity prices came under pressure after proposed US tax reforms and strong economic data supported the case for another US interest rate hike this year.

“..Investors will remain in wait-and-see mode, but this (tax reform) will definitely create some noise in financial markets in the weeks to come,” said ForexTime chief market strategist Hussein Sayed.

The mining index was down 1.11% while the Platinum index and Gold index were 1.48% and 0.21% lower respectively.

Hotel and Casino operator Sun International, weakened by 3.39% after it said it would swing into a half-year headline loss.

In fixed income, the yield for the benchmark government bond due in 2026 fell 1 basis point to 8.635%.

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