South African Rand Weakens Against US Dollar as October Inflation Surges

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Markets Await Reserve Bank’s Monetary Policy Decision

Stock Market Exhibit Resilience

SARB Governor Lesetja Kganyago

The South African rand faced a decline against the U.S. dollar following the release of October’s inflation data, which exceeded expectations. At 1636 GMT, the rand was trading at 18.8375 against the dollar, showing a 1% weakening compared to its previous close. Concurrently, the U.S. dollar saw an approximately 0.5% rise against major currencies.

Statistics South Africa reported a year-on-year increase in headline consumer inflation to 5.9% in October, up from 5.4% in September, surpassing the 5.5% forecast by analysts polled by Reuters. Despite this inflationary uptick, analysts anticipate the South African Reserve Bank to maintain unchanged interest rates in its Thursday session, considering that the inflation rise is attributed to non-core components.

Jason Tuvey, senior emerging markets economist at Capital Economics, noted, “The tightening cycle is unlikely to be restarted,” given the non-core component influence. However, there is a growing risk that policymakers might defer the commencement of monetary easing until much later in 2024.

Meanwhile, the stock market exhibited resilience, with the Top-40 and broader all-share indexes closing approximately 0.7% higher. In bond markets, South Africa’s benchmark 2030 government bond experienced weakness in late trading, with the yield rising by 23.5 basis points to 10.140%.

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