BLBG: Rand Weakens as Analysts Bet 7% Interest Rate to Stay Unchanged
By Garth Theunissen
Jan. 26 (Bloomberg) -- The rand weakened against the dollar as analysts bet South Africa’s central bank will today keep its benchmark interest rate unchanged as Africa’s biggest economy shows signs of recovery and inflationary pressures abate.
South Africa’s currency declined as much as 0.9 percent to 7.6707 per dollar and traded 0.5 percent weaker at 7.6401 by 9:42 a.m. in Johannesburg, from a close of 7.60 yesterday. Against the euro it lost 0.1 percent to 10.7616.
The Pretoria-based South African Reserve Bank is expected to keep its repurchase rate at 7 percent, according to 20 of 22 economists surveyed by Bloomberg. The rate compares with central-bank rates of 0.25 percent in the U.S., 0.1 percent in Japan and 1 percent in the euro-region economy.
“The consensus is overwhelmingly in favor of no change to the repo rate,” said Ian Cruickshanks, head of research at Nedbank Treasury in Johannesburg. “Markets are trading with a very low likelihood of a change in monetary policy and are more interested in gauging the tone of the statement in order to get an idea of where policy is heading.”
South Africa’s central bank lowered its main interest rate by 5 percentage points in the nine months through August after the economy fell into its first recession in 17 years. Growth resumed in the three months through September while a 28 percent rally in the rand last year helped curb inflation.
The economy expanded an annualized 0.9 percent in the third quarter while inflation eased to 5.8 percent in November, the second straight month that it fell within the central bank’s 3 percent to 6 percent target band.
Government bonds fell in South Africa, pushing up the yield on the benchmark 13.5 percent security due September 2015 by two basis points to 8.59 percent. The bond’s price, which moves inversely to the yield, fell 12 cents to 121.57 rand.
The Reserve Bank is scheduled to begin delivering its monetary policy decision after 3 p.m. local time.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
