#RandReport: Rand weaker after inflation rises

South African inflation accelerated to 6.8% year-on-year in December, beating market expectations.

Picture: Supplied.

JOHANNESBURG - The rand weakened on Wednesday, sliding as much as 1% at one stage as a firmer dollar and lower commodity prices hurt the currency.

On the bourse, stocks inched into the black, lifted by retailers on strong sales data.

By 1550 GMT the rand had slipped 0.26% to 13.5000 per dollar, steadying late in the session having sunk to a session low of 13.6050 as investors sold off the unit after consumer prices rose for the fourth month in a row.

Gold retreated from the previous day's eight-week high as promising economic data from the US drew fresh flows into the greenback, lifting the dollar index 0.2% in the session.

South African inflation accelerated to 6.8% year-on-year in December, beating market expectations. Despite inflation remaining outside the central bank's target of 3 to 6%, however, economists believe it has peaked and will soon fall back to within the target, dampening the rand's allure compared with other high-yielding currencies.

"The prospect of receding inflation and the ongoing weakness in economic activity should see interest rates remaining on hold in the months ahead," economist at Investec Kamilla Kaplan said in a note.

The South African Reserve Bank (SARB) meets to discuss monetary policy next Tuesday.

On the stock market, the JSE's All-share index advanced 0.2% to 52,933 points, while the benchmark Top-40 index rose 0.1% to 46,113.

Consumer goods firm Tiger Brands was the biggest gainer among the blue chips, followed by retailer Woolworths Holdings, after the statistics agency released better than expected retail sales for November.

Shares in Tiger Brands were up 3.6% at R406.90 and Woolworths gained 2.6% to R73.40.

Shoprite, Africa's largest grocer, advanced 2.1% to R180.26, supported by positive sentiment after, on Tuesday, reporting a 14% rise in half-year sales, said Independent Securities trader Ryan Woods.

"The market liked Shoprite's trading update and investors see some long term potential in Woolworths," he said.

Trading was below par with 244 million shares changing hands, according to preliminary bourse data, compared with the last year's daily average of 296 million.

In fixed income bonds weakened, with the yield on the benchmark 2026 issue rising 2 basis points to 8.65%.