UPDATE 1-South Africa's rand retreats as investors digest dovish central bank

  • Reuters
  • Forex News
UPDATE 1-South Africa's rand retreats as investors digest dovish central bank
Credit: © Reuters.

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JOHANNESBURG, March 26 (Reuters) - The South African rand was a touch weaker on Friday, with investors still digesting the central bank's decision to keep lending rates unchanged in the face of global inflation pressures and rate hikes in other emerging markets.

At 1500 GMT the rand ZAR=D3 was 0.15% weaker at 15.0300 per dollar, backtracking after some risk demand earlier in the session saw the unit touch 14.9425 before drifting above 15.00 again.

The Reserve Bank (SARB) left its repo rate at 3.5% for a fourth meeting in a row in a unanimous decision on Thursday. That knocked the rand to a two-week low and pushed up bond yields as investors saw a diminishing yield return on local assets. on the pre-MPC market positioning, which implied sooner-than-anticipated hikes, a correction in local asset prices was probable despite the SARB's dovish pronouncement," said Nema Ramkhelawan-Bhana, analyst at RMB.

While the decision was in line with most economists' expectations, a slew of rate hikes in countries such as Brazil, Russia and Turkey in response to climbing U.S. Treasury yields had raised speculation the SARB might follow suit.

On Friday Governor Lesetja Kganyago again poured water on rate hikes in 2021, but added that rates could not remain at record lows indefinitely. were firmer, with the yield on the benchmark 2030 paper ZAR2030= down 5 basis points to 9.485%.

The major indexes on the Johannesburg Stock Exchange (JSE) jumped more than 3% after several days of falls on slow global recovery worries. But markets changed tack on Friday driven by positive news flow from the United States and a rebound of China's blue chip technology stocks.

The benchmark all-share index .JALSH rose 3.16% on the day to end the week at 66,834 points, while the blue chip index .JTOPI closed up 3.32% at 61,244 points.

"In general, if U.S. and China are good then emerging market stocks perform much better," said Peter Takaendesa, head of equities at Mergence Investment Managers.

Weekly jobless claims in the United States dropped to their lowest level since the pandemic hit the country and President Joe Biden set a higher goal for vaccinating people in his first 100 days in office.

"This turned the global markets overnight," Takaendesa said.

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