South African rand weakens ahead of central bank rate decision
The rand weakened in early trade on Thursday, ahead of a much-anticipated interest rate decision by the South African Reserve Bank (SARB) later in the day.
At 0720 GMT the rand traded at 17.03 against the dollar,down 0.4% from Wednesday's close. Twenty-one of 28 economists polled by Reuters expect the SARB to keep its main lending rate steady at 6.75% with a hawkish outlook at its meeting at 1300 GMT.
The central bank's governor told Reuters earlier this month that the bank will revise its risk scenarios as the Middle East conflict continues to push oil prices higher.
"The SARB needs to decide whether to act pre-emptively on inflation and hike interest rates now, or whether to hold off, in the hope that the fluid situation in Iran calms down," said ETM Analytics in a note.
South Africa's annual inflation slowed to the central bank's target of 3% in February, but analysts said the slowdown could be temporary as the ripple effects of the Iran war will show up in upcoming releases.
Commerzbank analyst Volkmar Baur said: "We must wait and see. Should the conflict come to an end soon and oil prices return to normal, at least in part, the possibility of an interest rate cut is likely to arise again later this year."
Statistics South Africa will publish producer inflation numbers at 0930 GMT which could offer clues on the health of Africa's most industrialised economy. On the Johannesburg Stock Exchange, the Top-40 index was down 1.8% in early trade. South Africa's benchmark 2035 government bond also weakened, as the yield rose 10.5 basis points to 9.065%.
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