JOHANNESBURG, Sept 20 (Askume) – South Africa’s rand weakened in early trade on Friday after the Federal Reserve and the South African Reserve Bank (SARB) cut interest rates and the rand posted strong gains during the week.
At 0715 GMT, the rand was trading at 17.50 per dollar, down about 0.1% from its previous close.
The local unit gained about 1.4% against the dollar this week.
“In the short term the rand is likely to remain within the R17.40/R17.70 range as it tracks international trends, but given the rand’s recent strength we may see further profit-taking,” Finance Department One said.
The US dollar weakened and the risk-sensitive rand got a boost after the Federal Reserve cut interest rates by 50 basis points on Wednesday.
Also on Wednesday, data showed South Africa’s annual inflation rate fell to 4.4% last month, the lowest since April 2021 and just below the midpoint of the central bank’s target range of 3% to 6%.
The SARB announced a 25 basis point (bps) interest rate cut on Thursday (ZAREPO=ECI) , joining the comfortable club, the first rate cut in four years.
“We believe the South African Reserve Bank has now entered a rate-cutting cycle,” Commerzbank foreign exchange analyst Volkmar Bauer said in a research note.
“Further rate cuts are likely, but if accompanied by structural reforms to the economy, this should not put pressure on the rand,” Ball said.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI) was little changed in early trade .
South Africa’s 2030 benchmark government bonds were slightly weaker in early trade, with the yield rising 3 basis points to 8.88%.
