The rand weakened against the dollar after the Reserve Bank kept its benchmark rate at a record low, while the JSE closed firmer amid mixed global markets.
The Bank’s monetary policy committee (MPC) maintained the repo rate at 3.5% on Thursday, in line with the median forecast of 18 analysts surveyed by Bloomberg.
The rand weakened to an intraday low of R14.7594/$ after the announcement as concerns remain about SA’s economic stability after last week’s unrest and the country battles to contain a third wave of Covid-19 infections.
“There was pressure coming though from the MPC for longer-term normalisation of monetary policy,” said Investec chief economist Annabel Bishop. “The Bank highlighted that financial market and economic conditions are expected to remain volatile for SA in the foreseeable future,” Bishop said, adding that the effects of last week’s violence had “clouded the economic outlook”.
At 6pm, the rand had weakened 1.26% to R14.7288/$, and was down 0.95% to R17.3264/€ and 1.55% to R20.2445/£. The euro was 0.25% weaker at $1.1764.
Bonds yields rose slightly after the MPC announcement after trading little changed earlier in the day, with the R2030 government bond gaining four basis points to 8.98%. Bond yields move inversely to their prices.
“More broadly, the latest MPC statement confirms that investor confidence has indeed been shaken by recent events,” said North-West University Business School economist Prof Raymond Parsons. “But it is already clear that the impact on long-term investor sentiment depends not on the fact that widespread civil unrest has occurred, but on the degree of confidence displayed in how the situation will be managed from now on,” he said.
“The better SA is seen, both politically and economically, to be sensibly handling the aftermath of the recent violence and looting, the sooner investor confidence will recover. What investors need now is reassurance that they will not be exposed to these risks again, because the right remedies and [that] reforms will now be implemented that will keep SA investable,” Parsons added.
The JSE all share gained 0.27% to 67,404 points and the top 40 was 1.33% higher. Retailers rose 2.76%, industrials 1.48%, resources 1.23% and banks 1.1%.
At 6.10pm, the Dow Jones Industrial Average was down 0.24% to 34,715 points. In Europe, the FTSE 100 fell 0.43%, while France’s CAC 40 gained 0.26% and Germany’s DAX 30 added 0.6%.
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