S.African rand rallies after data shows slowing inflation, stocks up
* Inflation rates fall more than expected
* Stocks up on U.S. interest rate outcome
(Updates rand figure, adds stocks, trader comment)
JOHANNESBURG, Aug 21 (Reuters) - South Africa's rand rallied
more than 1% to its firmest in nearly a week on Wednesday on
optimism the central bank has room to boost the flagging economy
after consumer inflation fell more than expected, while stocks
At 1525 GMT the rand was 0.91% firmer at 15.23 per
dollar after opening at 15.3725, a chunk of those gains coming
after the data showed July consumer prices slowed to 4%, the
lowest since January.
The subdued price growth reignited bets the Reserve Bank
(SARB) may reduce rates again after a 25 basis point cut to 6.5%
in July, giving a boost to companies and consumers.
A sharp slump in the rand, about 10% since the beginning of
August, and fears of a global growth recession had all but
extinguished the chances of a cut.
"Repeated signs of inflation moderating during the third and
fourth quarter of 2019 should present the SARB an opportunity to
rejoin the global easing bandwagon," research analyst at FXTM
Lukman Otunuga said in a note.
Africa's most industrialised economy contracted by 3.2% in
the first quarter as nationwide power cuts by the ailing utility
Eskom hit mining, manufacturing and retailers.
With companies struggling to eke out profits as strained
consumers cut spending and face a weak growth outlook and
continued political uncertainty, monetary stimulus by a
typically cautious central bank may be the only short-term
solution the country has.
"The SARB is likely to retain a cautious policy stance in
view of the recent rand depreciation and persistent
vulnerability of a sovereign credit rating downgrade," said
Kamilla Kaplan of Investec.
Before the inflation data surprise, a poll in the previous
week by Reuters showed all but two of the 20 economists surveyed
saw lending rates staying on hold at the bank's September
On the bourse, stocks strengthened amid positive risk
sentiment as investors awaited the outcome of a meeting on U.S.
interest rate cuts.
The broader All-share index climbed 0.66% to 54,638
points, while the Top-40 index rose 0.6% to 48,837
Topping the blue chips was South Africa's Phamarcare Aspen
, which gained 6.95% to 69.52 rand. Discovery
also rose 4.77% to 104.87 rand, recovering after being affected
by jitters over the National Health Insurance Bill (NHI) bill.
The NHI bill seeks to centralise healthcare funding under
"The risk is back on, so all the shares that have been
pummelled over the last few days have been catching up," said
Byron Lotter, a portfolio manager at Vestact.
Bonds also responded positively to the inflation data, with
the yield on the benchmark paper due in 2026 down 12.5
basis points to 8.265%.
(Reporting by Mfuneko Toyana and Onke Ngcuka
Editing by Susan Fenton and Mark Heinrich)
First Published: 2019-08-21 14:56:22
Updated 2019-08-21 17:55:27
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