Market retreats most in two months on rates decision

THE MARKET dove into the red yesterday with the JSE falling the most in almost two months dragged by the decline in retailers and banks after the SA Reserve Bank (SARB) raised its inflation forecasts for this year.

The JSE All Share Index fell 0.73 percent to 64 783 index points, its lowest level since February 5, as fears over renewed lockdown restrictions will weaken the momentum in economic recovery.

The rand also pared early gains while stocks traded at a near 2-month low, weakening 0.2 percent to R15.06 against the dollar by 5pm as the looming third wave of Covid-19 infections and possible tighter restrictions drove traders to the dollar.

Analysts forecast that an appreciating collar could push the rand towards R15.17 and R15.35 in the near term.

The third wave of Covid-19 infections is expected to hit South Africa some time in April, and the mooted lockdown ahead of the Easter weekend could further derail any economic recovery.

Anchor Capital’s investment analyst Casey Delport said the tone and the message of the SARB governor Lesetja

Kganyago had been a bitter pill for the struggling rand.

Kganyago said the rise of fuel and electricity prices hedl an upside risk to the inflation trajectory which is expected to trend higher in the coming months.

SARB’s consumer inflation forecast for 2021 is higher at 4.3 percent, up from 4 percent, but it is still within the 3 to 6 percent target range.

“Essentially the rand is trading on the backfoot due to the rather dovish tone of the statement, and mixed economic outlook provided by the Sarb,” Delport said.

“The governor provided a bit of a reality check as to the many downward risks still present to South Africa’s overall economic outlook, and the rand reacted accordingly.”

The Medical Research Council warned that a third wave of Covid-19 was coming in the next few weeks, particularly after the April Easter weekend.

The Ministerial Advisory Committee on Covid-19 has thus recommended that the government impose tighter lockdown restrictions for the upcoming long Easter weekend.

In some countries, particularly in Europe, the third wave continued to spark fears that the recovery from the Covid-19 pandemic could take longer than expected.