The South African rand weakened as the central bank kept the interest rate unchanged at 7.50%. The rand traded at 18.22 against the dollar, down by 0.5%. The U.S. Federal Reserve’s decision to hold rates and lower growth forecasts influenced market dynamics. Economics suggest rates may remain high due to inflation risks, while the stock market faced declines.
On March 20, 2023, the South African rand was observed to weaken following the central bank’s decision to maintain its main interest rate. At 1352 GMT, the rand was trading at 18.22 against the U.S. dollar, reflecting a decline of approximately 0.5% from the previous closing rate. The dollar also exhibited a robust performance, increasing by about 0.7% against a range of currencies as market participants processed the U.S. Federal Reserve’s announcement of no rate hikes and a revised lower growth forecast.
The South African Reserve Bank (SARB) opted to pause its ongoing rate-cutting cycle, keeping the repo rate at 7.50%. This decision was influenced by the adverse effects of the ongoing global trade tensions initiated by U.S. President Donald Trump, as well as the political deadlock affecting South Africa’s national budget. Governor Lesetja Kganyago remarked at a press conference, “Some policy adjustments by major central banks are still expected this year, but rates are likely to remain high for longer, given new inflation risks.”
Economists surveyed by Reuters had predicted that the central bank would hold rates steady under current circumstances. On the Johannesburg stock market, the Top-40 index was trading approximately 0.8% lower, indicating a decline. Conversely, South Africa’s 2030 government bond showed modest improvement, with its yield decreasing by 3.5 basis points to 9.05%.
The South African rand experienced a downturn as the central bank maintained its interest rate, reflecting the ongoing economic challenges posed by external trade tensions and internal fiscal uncertainties. Despite expectations for future policy adjustments, high rates are anticipated to persist due to inflationary pressures. Overall, the equity market showed signs of decline, contrasted with slight strengthening in government bonds.
Original Source: www.cnbcafrica.com
