JOHANNESBURG (Reuters) -South Africa’s rand firmed on Thursday, after a deputy finance minister indicated that a lower inflation target could be introduced soon, analysts said.
At 1525 GMT, the rand traded at 18.0775 against the dollar, about 1.1% firmer than Wednesday’s closing level.
“The rand is reacting positively to news that Treasury is supporting the (central bank’s) long standing idea of changing and lowering the inflation target framework,” said Shaun Murison, senior market analyst at IG.
Analysts were quoting Deputy Finance Minister David Masondo’s comments at an investor conference that an announcement would be made “very soon” regarding South Africa’s inflation-targeting regime.
The South African Reserve Bank’s (SARB) current inflation target sits in the 3-6% range and its governor Lesetja Kganyago has for years stressed his preference for a lower target, saying the current band is too wide.
Murison said more details may be revealed by the central bank on May 29, when it is expected to announce its latest interest rate decision.
Market focus will also be on a revised budget speech to be delivered by Finance Minister Enoch Godongwana next week, which coincides with the meeting between South Africa’s President Cyril Ramaphosa and his U.S. counterpart Donald Trump.
South Africa’s presidency late on Wednesday said the meeting on May 21 would provide a platform to reset the strategic relationship between the countries, which have been at odds since Trump returned to the White House in January.
South Africa’s mining output fell 2.8% year on year in March compared with a revised decrease of 9.7% in February, statistics agency data showed earlier in the day.
On the stock market, the Top-40 index closed about 0.1% lower.
South Africa’s benchmark 2030 government bond was stronger, with the yield down 8 basis points to 8.87%.
(Reporting by Sfundo Parakozov and Bhargav Acharya; Editing by Louise Heavens and Ed Osmond)
