South African rand slips with focus on rate decision

South African Rand coins are seen in this illustration picture taken October 28, 2020. REUTERS/Mike Hutchings/Illustration

JOHANNESBURG (Reuters) – South Africa’s rand slipped against a stronger dollar on Wednesday, as investors turned their focus to the central bank’s rate decision due the following day.

At 1619 GMT, the rand traded at 19.2800 against the dollar, around 0.35% weaker than its previous close.

The dollar was trading more than 0.3% higher at 103.890 against a basket of global currencies, as unease over U.S. debt ceiling negotiations sent investors to safe havens.

South Africa’s headline consumer inflation slowed to 6.8% in April from 7.1% in March, data showed on Wednesday, slightly lower than the 7% predicted by analysts.

READ MORE: South African rand stabilises after Monday’s mini-recovery

The South African Reserve Bank will announce its interest rate decision on Thursday as it attempts to rein in inflation, which it targets within the range of 3% to 6%. Analysts polled by Reuters predict a 25-basis-point hike.

“The April CPI print was considerably more benign than in recent months. However, we think that the downside surprise is unlikely to have much bearing on the MPC decision tomorrow… given that, in our view, the SARB is mostly reacting to exchange rate weakness,” wrote Andrew Matheny at Goldman Sachs.

READ MORE: Rand falls to record low, recovers after authorities dent Russian arms shipment

Goldman Sachs expects a 50 basis point hike which will mark the end of the SARB’s tightening cycle, he said.

Shares on the Johannesburg Stock Exchange closed lower, with the blue-chip Top-40 index down 1.60% and the broader All-share index down 1.47%.

South Africa’s benchmark 2030 government bond was stronger, with the yield down 19 basis points to 11.045%.

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