Rand recovers as inflation declines

THE RAND clawed back losses to end largely flat yesterday following a lower inflation readout that triggered some selling by foreign investors searching for higher yields as the likelihood of further interest rate cuts increased.

By 5.25pm, the rand was bid at R13.1970 to the dollar, having tumbled to a session low of R13.2775 soon after consumer price-growth data for July slowed to a two-year low.

The rand was aided by a slump in the greenback, which edged down after US President Donald Trump’s threat of a government shutdown and comments about the possible termination of a North American trade agreement.

Traders said investors looking to bag profits via carry trades on the rand sold the currency in anticipation of lower interest rates.

Headline consumer inflation slowed to its lowest since September 2015, falling to 4.6 percent year-on-year in July, the statistics agency said yesterday, as food prices fell further along with most sub-sectors.

On a month-by-month basis prices inched up to 0.3 percent from 0.2 percent.

Government bonds were weaker, with the yield for the benchmark bond due in 2026 up.

Meanwhile, stocks ended slightly higher but were restricted by a drop in full year earnings from Murray & Roberts.

The benchmark JSE Top40 index ticked up 0.29 percent to 49 734.51 points, while the all share index lifted 0.23 percent to 56 162.3 points.

Gains were curbed by engineering and construction company Murray & Roberts, which dropped 4.34 percent to close at R13.68 after reporting a 59 percent fall in full-year earnings.