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S.Africa’s rand firms slightly after Marcus comments

By on March 30, 2011

South Africa’s rand firmed slightly against the dollar on Wednesday after comments from central bank governor Gill Marcus about not going soft on inflation raised expectations of an interest rate hike.

In a speech on Tuesday evening, Marcus said the Reserve Bank would take whatever measures necessary to tackle rising consumer inflation.

The central bank kept rates steady at 5.5 last week. It has cut rates by 650 basis points since 2008, taking lending costs to their lowest in three decades.

“She did say that she will not be soft on inflation, which I think has got the interest rate markets quite excited,” said Jim Bryson, a trader at Rand Merchant Bank.

The rand was trading at 6.8534 against the dollar at 0634 GMT, a shade stronger than Tuesday’s New York close of 6.8505.

Marcus also said the bank would continue to build reserves, although reiterated that she did not have a target level for the rand.

“No real change in the rand implies there will still be reserve accumulation, and they are not obviously targeting a specific level in the rand so nothing has changed for the rand,” Bryson added.

The rand gained about 12 percent against the dollar last year despite the central bank spending just under 55 billion rand accumulating reserves.

Separately on Wednesday, figures showed growth in credit demand by South Africa’s private sector accelerated 5.43 percent year-on-year in February compared with 5.01 percent in January.

Growth in the broadly defined M3 measure of money supply slowed to 7.55 percent year-on-year compared with a 8.19 percent in January.

The JSE’s blue-chip June stock futures contract was 0.89 percent higher before the bourse’s open at 0633 GMT.

Government bonds eased fractionally after weakening on Tuesday after an auction that saw yields jump more than 6 basis points.

The yield on the 2015 bond was up 2.5 basis points at 7.85 percent and that on the longer dated 2026 note was up 0.2 basis points at 9.015 percent.


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