RAND SLIPS, STOCKS HIGHER

THE RAND weakened yesterday as a jump in consumer prices in the US raised fears that the central bank would tighten its monetary policy, cutting off a key source of supply to riskier assets.

At 5pm, the rand was down about 0.27 percent at 14.05 to the dollar, having touched a session best of R13.95 before succumbing to risk aversion after the US inflation print prompted some investors to take profits from the unit’s recent rally.

The rand has been the best-performing currency against the dollar in recent weeks, up around 5 percent this year. The unit, which hit a 16-month high on Tuesday, has had a strong run since March, prompted by lower rates in the developed world, a surge in global commodity prices and signs the local economy is on track for a better-than-expected recovery.

“There are concerns over the impact that tightening financing conditions abroad will have on the ZAR, given SA’s fragile fiscal risk profile,” said economists at ETM Analytics.

Bonds weakened, with the yield on the benchmark government bond due in 2030 rising 8 basis points at 9.06 percent.

Shares on the JSE opened strong but closed marginally higher than Tuesday, as US consumer price numbers showed signs of inflation catching up with unfettered growth of emerging market stocks.

Higher inflation, which triggers a rise in interest rates, eats away the value of future returns on investments, while higher interest rates increase the cost of capital for companies.

The all share index rose 0.27 percent at 67 424.27 points, while the Top40 index ended up 0.34 percent at 61 529.14 points.

“Markets obviously react to headlines and today’s U.S. inflation numbers have shaken the markets,” said David Shapiro, an independent market analyst.