Rand adds further gains, JSE buoyed

The rand extended the previous session’s gains on Wednesday after data from Stats SA showed inflation moderated for a second straight month.

SA’s annual inflation rate as measured by the consumer price index fell to 5.1% in December from 5.5% in November — the lowest reading in four months and better than the market consensus of 5.2%.

Core inflation, excluding volatile items such as food and nonalcoholic beverages, fuel and energy, remained steady at 4.5% in December and was lower than the 4.6% forecast by the market. The report comes a day before the Reserve Bank is due to announce the outcome of its first monetary policy committee meeting of the year.

“This reading in headline inflation supports the view that the Reserve Bank could keep the repo rate steady at the MPC’s meeting on Thursday,” PSG Wealth CIO Adriaan Pask said. “If inflation continues to trend down, we believe the Bank could also start to cut interest rates later this year.”

Shaun Murison, senior market analyst at IG, said the rand clawed back some of its recent losses thanks to higher export commodity prices being supported by a softer dollar and recent news of a $278bn stimulus package by China to support its stock markets.

“These gains in the rand have extended and accelerated after local inflation data was released,” he said. “The Reserve Bank is likely to assess the timing of international rates being eased before making their move to try stem capital outflows and maintain some carry trade opportunity.”

At 6.39pm, the rand had strengthened 0.74% to R18.8947, having touched an intraday best of R18.7888.

It was 0.21% stronger at R20.599/€ and 0.24% firmer at R24.0756/£. The euro was 0.47% firmer at $1.0902.

The JSE was firmer, buoyed by gains in retailers, miners and industries, with the all share rising 1.34% to 74,320.11 points and the top 40 adding 1.39%.

The advance in global markets came after China announced measures to boost what has been a disappointingly weak recovery for the world’s second-largest economy.

At 7.06pm, the Dow Jones industrial average was 0.32% firmer at 38,028.43 points, while markets in Europe also closed stronger. London’s FTSE 100 gained 0.56%, France’s CAC 40 0.91% and Germany’s DAX 1.58%.

Gold eased 0.8% to $2,012.59/oz, while platinum gained 0.87% to $903.30/oz. Brent crude was 1.39% firmer at $80.45 a barrel.