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Rand strengthens after central bank cuts repo rate, stocks fall

The central bank cut its main lending rate by 50 basis points to 3.75% on Thursday in an effort to shield the economy from the impact of the virus. Rate cuts this year now total 275 basis points.

South African rand.  Picture: Christa Eybers/EWN

JOHANNESBURG - The rand rallied on Thursday after the country’s central bank cut its main lending rate by 50 basis points, while stocks fell on concerns over the long-term impact of the new coronavirus and simmering US-China tensions.

At 1653 GMT, the rand was 1.57% firmer at R17.6450 per US dollar after hitting R17.5100, its best level in more than a month.

The central bank cut its main lending rate by 50 basis points to 3.75% on Thursday in an effort to shield the economy from the impact of the virus. Rate cuts this year now total 275 basis points.

“With inflation expected to continue to slow in coming months, further cuts might be on the cards at the June MPC (Monetary Policy Committee) meeting as well as later in the year,” executive director at Peregrine Treasury Solutions Paul Muller said in a note.

The reappearance of tensions between the United States and China, the world’s two top economies, has capped gains however, after U.S. President Donald Trump’s attacks on Beijing’s handling of the coronavirus outbreak spooked already nervous investors.

Bonds weakened, with the yield on the government issue due in 2030 up 8.5 bps to 7.305%.

On the stock market, the benchmark JSE all-share index fell 2.15% to end at 51,023 points, while the top 40 companies index closed down 2.37% to 47,232 points.

Bullion shares fell 7.51% with Gold Fields down 6.96% and Harmony Gold 6.95% lower on the back of a weaker spot gold price.