Rand Firms After SARB’s Higher Rate Hike

  • Market Overview

The rand strengthened to below R17.80/USD at 15h30 after the South African Reserve Bank (SARB) hiked its interest rate by 50 basis points (bps), more than the 25 bps markets expected. At 20h00 the rand was trading at R17.83/USD, R22.08/GBP and R19.43/EUR. “The decision surprised markets that expected a smaller 25 bps increase and pushed borrowing costs to the highest since May 2009. The South African Reserve Bank has now raised rates for the ninth time in a row, adding a total of 425 bps to the repo rate since it began tightening policy in November 2021 to tame inflation. At the same time, the South African rand has been benefiting from a weaker dollar on growing expectations that the US Federal Reserve will pause interest rate hikes in May and follow with rate cuts soon after that due to the financial turmoil,” Trading Economics reported.

A jump in the shares of retail giant, H&M after reporting a better-than-expected operating profit between December 2022 and February 2023 boosted markets in Europe yesterday. The regional STOXX 600 closed up by 1.10%, while Germany’s DAX “rose 1.3% to above 15,522, the highest close since 9 March, as investors digested key inflation data and as concerns about the recent banking turmoil continued to ease. The latest CPI reports showed inflationary pressures in both Germany and Spain cooled sharply in March, with rates of inflation falling to seven and 20-month lows, respectively. Still, the numbers came in well above the European Central Bank's target of 2%,” adds Trading Economics. Wall Street was also trading higher at 20h00 as concerns over challenges at some regional banks started to subside.

Most Asian markets also closed up on Thursday after “newly-minted Chinese Premier Li Qiang emphasized in his first international address the need for peace as a prerequisite for development.” The Hang Seng rose by 0.58% after “Qiang (said) that China's economic situation in March would be better than in the first two months of the year, as the country expands its domestic market, promote the business sector, and prevent financial systemic risks,” reported Trading Economics.

A recovery in demand and a lower-than-expected decrease in Russian oil supplies boosted the price of Brent crude , which traded at $79.38 a barrel at 20h00.

PSG Wealth Daily Investment Update, 31 March 2023

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