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South Africa's rand firms on weaker dollar after Fed chair speech
(Updates prices, adds analysts' comments)
By Olivia Kumwenda-Mtambo and Onke Ngcuka
JOHANNESBURG, Aug 23 (Reuters) - South Africa’s rand firmed
to a two-week high on Friday as the dollar slipped after U.S.
Federal Reserve Chair Jerome Powell set the stage for further
interest rate cuts.
At 1540 GMT the rand was 0.41% firmer at 15.1800
per dollar, after hitting a two-week peak of 15.0750 earlier in
the immediate aftermath of Powell's speech.
In his speech, Powell said the U.S. economy is in a
"favourable place" and the Fed will "act as appropriate" to keep
the economic expansion on track.
Markets had been divided on what they thought Powell would
say at the Jackson Hole, Wyoming, symposium, with some expecting
him to announce a major stimulus measure while others believed
he would downplay the chances of a September rate cut.
"It has been a positive trading week for the local currency
thanks to global stimulus hopes and a slowdown in domestic
inflation, which boost expectations of a (South African Reserve
Bank) rate cut," Lukman Otunuga, a senior research analyst at
FXTM, said in a note.
Headline consumer price inflation slowed to 4.0%
year-on-year in July, data from Statistics South Africa showed
on Wednesday, the lowest since January and below a consensus
forecast of 4.2%.
Lower inflation against relatively high interest rates
marginally supports the rand's carry-yield attraction, but gains
based on such data tend to be quickly overtaken by other factors
such as high levels of local credit risk and diminishing chances
of lower U.S. benchmark rates.
In equities, Johannesburg's broader All-share index
fell 0.35% to 53,996 points, while the benchmark Top-40 index
declined 0.39% to 48,248 points.
Retailers were among the biggest decliners, with Massmart
shedding 7.81% to 40.26 rand, while Shoprite
fell 3.61% to 116.29 rand.
"The whole retail index was not looking all that healthy,"
said Bright Khumalo, portfolio manager at Vestact. "It's a story
of volumes; lower volumes as a result of consumers that are wary
of what they spend their hard-earned money on."
In fixed income, the yield on the benchmark bond due in 2026
added 0.5 basis points to 8.275%.
(Reporting by Olivia Kumwenda-Mtambo and Onke Ngcuka
Editing by David Holmes)
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