South African rand firms, inflation print this week

Rand blues
The inflation rate for South Africa is set to be announced this week.
REUTERS
  • 1 Day Ago
South Africa's rand firmed in early trade on Friday, paring some losses from Thursday, ahead of a domestic inflation reading this week which could provide clues on the central bank's rate cutting path.

At 06:30 Greenwich Meridian Time, the rand traded at 17.60 against the dollar, about 0.4% stronger than its previous close.

The dollar last traded about 0.2% softer against a basket of currencies.

"Yesterday’s blow-out raises the possibility that the phase of South African rand weakness has now completed, and that the local unit could make a stronger recovery as we close out the week," ETM Analytics wrote in a research note on Friday.

This week, domestic investors will look to September's consumer inflation figures, which could provide clues on the South African Reserve Bank's interest rate path. The central bank cut its main lending rate for the first time in more than four years in September, a day after data showed headline inflation fell just below 4.5%, the middle of the central bank's target range.

Last Thursday, South Africa's central bank governor Lesetja Kganyago said the country could move to a lower inflation target at little cost.

"One of the requirements for a stable currency is low inflation; therefore, any talk of lowering the inflation target should be mildly supportive of the South African rand," ETM Analytics wrote.

South Africa's benchmark 2030 government bond was little changed in early deals.