JOHANNESBURG (Reuters) – The South African rand was little changed in early trade on Tuesday, as domestically focussed investors awaited the release of inflation data and an interest rate decision later this week.
At 0734 GMT the rand traded at 17.3425 against the dollar, near Monday’s closing level of 17.3450.
“If anything, the ZAR is disappointing in its movements at the moment. Data shows that the performance of the ZAR is heavily linked to the interest foreigners show in South Africa’s bond market,” ETM Analytics said in a research note.
South Africa’s benchmark 2035 government bond was slightly weaker, as the yield rose one basis point to 9.225%, after shedding 12 basis points on Monday, trading around its best level since 2018.
ETM Analytics said the boost came from a survey which showed that longer-term inflation expectations dropped to a record low, after the South African Reserve Bank (SARB) said it would aim for a lower inflation target.
“The survey highlighted how the SARB has already achieved some success in forcing inflation expectations lower, which has attracted more flows into the bond market and, by extension, the ZAR,” the note read.
It added that the rand will take further guidance from the Federal Reserve and SARB rate decisions this week and the relative carry trade that might follow.
South Africa’s central bank will announce its rate decision on Thursday, preceded by the release of Consumer Price Index figures around 0800 GMT on Wednesday and retail sales data at 1100 GMT.
The dollar last traded 0.3% weaker against a basket of currencies ahead of the Federal Reserve’s policy meeting where the U.S. central bank is widely expected to cut interest rates.
On the Johannesburg Stock Exchange, the Top-40 index was last up 0.2% in early trade.
(Reporting by Sfundo Parakozov; Editing by Andrew Heavens and Kim Coghill)
