Rand softer as lending rates unchanged

THE RAND weakened yesterday after the central bank kept lending rates unchanged but warned that risks to inflation were rising and the outlook for economic growth had worsened, extending a sell-off from earlier in the session.

At 5pm, the rand bid at R13.5027 to the dollar, 22 cents softer than at the same time on Wednesday.

“Although this policy decision was widely expected, the downgrade in GDP growth forecast dealt a swift blow to sentiment,” said Lukman Otunuga, an analyst at FXTM.

The Reserve Bank kept its benchmark repo rate unchanged at 6.5 percent for a second consecutive meeting, warning risks to inflation were materialising while the growth outlook had deteriorated.

At the meeting it cut its 2018 growth forecast to 1.2 percent from 1.7 percent.

Bonds were also weaker, with the yield on the benchmark paper due in 2026 adding 6 basis points to 8.74 percent.

On the bourse, stocks were steady, ticking up slightly with Steinhoff shares among the biggest advancers.

The JSE Top40 index closed up 0.06 percent at 50 199.7 points, while the broader all share index rose 0.07 percent to 56 276.72 points.

Retailer Steinhoff closed up 18.67 percent to R3.56 after it said that about 90 percent of creditors for several subsidiaries supported an agreement to hold off debt claims for three years.

“There is no fresh news driving the markets. The Steinhoff shares are up quite nicely, one would’ve thought it would come up higher as the lock up agreement has come through and they can now focus on their core business,” said Cratos Capital trader, Greg Davies.

Among other gainers drugstore chain Dis-Chem Pharmacies rose 7.07 percent to R27.73 after it said group sales rose 11 percent in the first four months of the financial year. Steelmaker ArcelorMittal leapt 18.47 percent to R2.95 after it said it expected half-year earnings to swing into profit.

Meanwhile, the US dollar hit a year high yesterday against a basket of major currencies, but copper prices tumbled and major world stock markets pulled back amid concerns over China’s economy and continued global trade tensions.