Rand falls on rate cut, re­tail­ers ben­e­fit

The Star Early Edition - - PRICES - Reuters Tru­worths In­ter­na­tional, Mass­mart,

THE RAND shed as much as 1 per­cent against the dol­lar yes­ter­day af­ter the cen­tral bank un­ex­pect­edly cut its bench­mark lend­ing rate for the first time in five years.

At 5pm, the rand was bid at R13.013 to the dol­lar, 7.47c softer than at the same time on Wed­nes­day. This was about 0.65 per­cent weaker com­pared to its New York close. It ear­lier fell over 1 per­cent to R13.065, its low­est level in al­most a week.

The 25 ba­sis point lend­ing rate cut to 6.75 per­cent makes the rand less at­trac­tive com­pared to other cur­ren­cies as the yield that can be reaped from lo­cal rates has now nar­rowed on the global stage.

“The rand weak­ened be­cause of the ef­fect on the dif­fer­en­tials with de­vel­oped mar­kets who are be­gin­ning to hike rates,” said Halen Bothma, an econ­o­mist at ETM An­a­lyt­ics.

Twenty-four of 27 economists polled by Reuters had fore­cast the bank would hold rates at 7 per­cent. Two pre­dicted a 25-ba­sis-point cut and one ex­pected the repo rate to be cut by half a per­cent.

Gov­er­nor Le­setja Kganyago cited weak growth and eas­ing in­fla­tion as key fac­tors be­hind the de­ci­sion and de­nied the bank was af­fected by re­cent po­lit­i­cal at­tacks against its man­date to con­tain in­fla­tion and protect the cur­rency.

Bonds firmed, with the yield on the bench­mark govern­ment bond due in 2026 fall­ing.

Mean­while, stocks rose, with lo­cal re­tail­ers bol­stered by the rate cut. The big­gest ad­vancers on the day were

which rose 4.06 per­cent to R78.50 and up 3.81 per­cent to R112.63.

The bench­mark JSE Top40 in­dex gained 0.34 per­cent to 47 748.68 points, while the all share in­dex rose 0.36 per­cent to 54 287.32 points.

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