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Economists hope rand will regain more ground today

It has regained major ground against the dollar, pound and euro, following huge losses late last year.

South African money. Picture: Facebook.

JOHANNESBURG - Economists are hoping that the rand will regain more ground today after strengthening against major currencies last week.

The South African Reserve Bank announced that the repo rate would increase by 50 basis points to curb inflation.

The move bolstered the rand, which has been under huge pressure over the past few months.

It has regained major ground against the dollar, pound and euro, following huge loses late last year.

Governor Lesetja Kganyago explained yesterday that inflation needed to be kept in check and the bank had no choice but to increase the rate.

The firing of Finance Minister Nhlanhla Nene and various international factors sent the local currency into a tailspin.

However, there was a different picture on Friday, with the financial sector finishing the week on a high and banking shares making gains.

Banks were among those hardest hit when President Jacob Zuma changed finance ministers in December.

Banking stocks normally benefit from a rise in interest rates, as banks earn more from their investments.

As those in debt face more pressure, hopefully a stronger rand will bring some good news with lower inflation.

INTEREST RATES HIKE

Last week, it was anticipated that there would be interest rate hike and that it would deliver another blow to farmers struggling amid a drought.

The water crisis has already increased debt levels among farmers and affected food prices.

AgriSA Senior Economist, Thabo Nkosi, said the Reserve Bank may be forced to raise rates even if it would negatively affect highly indebted farmers.

"It's not a good thing, especially in this drought period but we do understand a very difficult position the Reserve Bank is in at the moment."

For farmers yielding low production levels and facing below average income due to the drought, a rates hike will no doubt add weight to their burden.