South Africa’s rand firmed early on Thursday in response to the softer dollar and comments from Finance Minister Trevor Manuel, who said he was concerned about using interest rates as the only tool to fight inflation.
At 0700 GMT the rand was trading at 10,56 to the dollar — little moved from its previous Johannesburg close — after softening overnight to 10,62/dollar.
”The rand is benefiting from that (Manuel’s comments) — people will welcome it,” a local trader said.
”There is also dollar weakness across the board. I think it will stay in its range between 10,50 and 10,70.”
South Africa’s central bank has raised its key repo rate by four percentage points so far this year to quash price pressures ignited mainly by the rand’s slump late in 2001, and its knock-on effect on dollar-denominated grain prices.
News that inflation soared again in August have fanned fears that there could be another interest rate hike before the year is over, which would curb relatively sedate economic growth.
Manuel suggested that the CPIX index targeted for monetary policy — which strips out the impact of changes in home loans — could be reviewed.
”If we can sharpen the instrument a bit through an examination like this — the CPIX is not a sacred cow, we should be taking a look at it — then we will be taking steps in the right direction,” he told national radio.
Bonds were little changed.
The yield on the benchmark R153 bond, due 2010, was one basis points up at 11,76%, while the yield on the R150, due 2005, was bid one basis point lower at 12,13%. – Reuters