Rand drops as US inflation eases

The rand weakened the most in more than three weeks as investors considered slightly lowerthan-expected US inflation data. Losses among miners and industrials eclipsed gains in banks and financials. At 6pm, the rand had eased 1% to R14.2761/$.

The rand weakened the most in more than three weeks as investors mulled over slightly lower-than-expected US inflation data. The JSE fell in line with weaker Shanghai and Hong Kong. Losses among miners and industrials eclipsed banks and financials gains.

US inflation data is watched closely for signs of when the Federal Reserve will start tapering its monthly stimulus. The country’s consumer price index (CPI) rose 5.3% in the year to end-August, slightly below the 5.4% increase in June and July, the Bureau of Labour Statistics said on Tuesday.

Investors have been divided on the trajectory of US inflation for months.

Some say the recent spike was temporary as it was fuelled by pent up demand with the US economy reopening as Covid restrictions eased. Others say higher inflation could be more durable. Fed chair Jerome Powell has reiterated his view that price increases are likely to slow.

The rand has been sensitive to the possibility of the US reducing its bondbuying programme, falling to R15.40/$ in August, its weakest level in five months, before bouncing back over the past couple of weeks.

At 6pm, the rand had eased 1% to R14.2761/$, 1.08% to R16.8861/€ and 1.07% to R19.7775/£. The euro was 0.14% firmer at $1.1826.

“It looks like the Fed may have got inflation right. An inflation slowdown could be what is needed to justify their taper delay, and suggests they have a couple more months to see how the labour market recovery unfolds. For now, this inflation round easily went to team transitory,” said Oanda senior market analyst Edward Moya.

The JSE all share slipped 0.54% to 64,300 points and the top 40 0.65%. Industrial metals fell 2.08%, resources 1.99% and precious metals 1.54%. Financials rose 1.45% and banks 1.31%.

Kumba Iron Ore was the biggest loser among industrial metals, falling 2.49% to R607.18. In the precious metals sector, Anglo American Platinum lost the most in four weeks, ending 5.54% lower at R1,365.50.

Standard Bank led the gains in its sector, rising 2.22% to R147.37, the most in three weeks. FirstRand added 1.68% to R60.69.

Pepkor’s share price had its biggest drop since May 2020 — when SA was in its first hard lockdown — after Steinhoff said it had raised R7.3bn by selling a portion of its stake in the company to help raise money to fund a settlement deal for investors and shareholders hit by SA’s biggest corporate scandal.

Pepkor fell 7.65% to R20.05 while Steinhoff gained 3.38% to R3.58.

Gold added 0.6% to $1,803.70/oz, while platinum lost 1.69% to $946.08. Brent crude was little changed at $73.56 a barrel.