South African Rand Firms Up, Markets Price In SARB Rate Hike
South African Rand (ZAR) firmed up on Thursday as markets price in a monetary policy rate hike by the South African Reserve Bank (SARB) following an accelerated headline inflation rate.
The country’s inflation picked up more sharply than expected in June, bolstering expectations that the central bank will deliver a second consecutive interest rate hike on Thursday.
Consumer inflation accelerated to a two-year high of 5.0% in June from 4.5% in May, data from Statistics South Africa showed on Wednesday.
The transport category was the largest contributor to both the annual and monthly rises in the Consumer Price Index, as the Iran war sent fuel prices sharply higher.
In a brief, First National Bank (FNB) revealed the rand is trading firmer on the expectation that SARB will maintain a hawkish stance in its fight against inflation and support demand for rand-denominated assets.
This has helped the local currency remain resilient despite elevated oil prices and heightened geopolitical tensions in the Middle East. The Bank said the rand is changing hands at R16.35 against the US dollar, R18.70 to the euro and R21.90 to the pound.
Oil prices climbed as concerns grow over continued disruptions to global crude supplies. The Houthis have claimed responsibility for attacks on Saudi oil tankers in the Red Sea, while tanker traffic through the Strait of Hormuz remains severely constrained.
The risk of disruptions at two of the world’s most important oil shipping chokepoints has heightened fears of tighter energy markets and sustained inflationary pressures. Brent crude is hovering over $95.92/barrel.
On the other hand, Gold is trading marginally lower at $4128 per ounce as rising oil prices and higher bond yields continue to fuel expectations that interest rates could remain elevated for longer.
While escalating tensions in the Middle East have supported demand for safe-haven assets, concerns that higher energy costs could keep inflationary pressures elevated have weighed on bullion prices.
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