RATE CUT BOOSTS THE RAND

THE RAND rallied yesterday after the country’s central bank cut its main lending rate by 50 basis points, while stocks fell on concerns over the longterm impact of the new coronavirus and simmering US-China tensions.

At 6.53pm, the rand was 1.57 percent firmer at R17.6450 to the dollar after hitting R17.51, its best level in more than a month.

The central bank cut its main lending rate by 50 basis points to 3.75 percent in an effort to shield the economy from the impact of the virus. Rate cuts this year now total 275 basis points.

“With inflation expected to continue to slow in coming months, further cuts might be on the cards at the June MPC (monetary policy committee) meeting as well as later in the year,” executive director at Peregrine Treasury Solutions, Paul Muller, said in a note.

The reappearance of tensions between the US and China, the world’s two top economies, has capped gains however, after US President Donald Trump’s attacks on Beijing’s handling of the coronavirus outbreak spooked already nervous investors.

Bonds weakened, with the yield on the government issue due in 2030 up 8.5 bps to 7.305 percent.

On the stock market, the JSE all share index retreated 2.15 percent to end at 51 022.76 points, while the Top40 companies index closed down 2.37 percent to 47 232.26 points.

Bullion shares dropped 7.51 percent with Gold Fields down 6.96 percent to R140.13 and Harmony Gold

6.95 percent lower at R61.56 on the back of a weaker spot gold price.

Meanwhile, annual inflation in Nigeria rose for the eighth consecutive month in April, lifted by higher food prices, the statistics office said yesterday, as measures to curb the spread of the novel coronavirus hindered economic activities and increased costs. I Reuters