The South African rand rallied on Wednesday after new inflation data showed consumer price growth easing to lower than expected levels and amid a broad rise among emerging market currencies.
The rand rallied 1.7 per cent against the dollar on Wednesday morning to R14.64. Several other EM currencies that are actively traded during the European day, including the Turkish lira, also advanced.
The inflation release comes ahead of Thursday’s rate decision from the South African Reserve Bank’s monetary policy committee. Economists polled by Reuters expect the central bank to keep rates on hold for the moment.
The headline consumer price index showed prices were 4.9 per cent higher in August compared to the same period last year. Economists had predicted the index would increase to 5.1 per cent, according to a poll by Thomson Reuters.
The country’s core inflation — which strips out volatile energy and food prices — came in at 4.2 per cent for August, softer than the 4.3 per cent reported for July.
The rand has lost about 16 per cent of its value since the start of the year due to a mixture of poor domestic growth and weak commodity prices. The currency has also borne the brunt of souring sentiment on emerging markets as a heavily exposed currency — the equivalent of nearly a fifth of South Africa’s GDP trades in the rand every day.
Africa’s most industrialised economy slid into recession for the first time since 2009 in the first half of 2018. Data on economic growth and industrial figures published earlier this month disappointed investors, as it suggested the economy was much weaker than previously thought.
