The rand retreated from year highs against the dollar on Tuesday amid caution ahead of the release of October consumer inflation data which is expected to surprise on the upside, traders said.
At 0630 GMT, the rand was trading at 9,6550 to the dollar after firming to 9,5350 on Monday, its best level since November last year. It closed at 9,6140 in overnight trade.
”Some caution is being expressed ahead of the CPIX data. However, we need to bear in mind that the data could disappoint and if it does it could be rand positive,” said George Glynos, a markets analyst at MMS International.
”If inflation comes in higher, expectations of a decline in interest rates could be shifted further out.”
Analysts are expecting interest rates to fall in the second half of 2003. A Reuters consensus poll on Friday forecast the targeted CPIX rising by an annual 12,2% in October compared to 11,8% in September. The figures are due at 0930 GMT.
The rand has gained 25% against the dollar this year after plunging 37% in 2001. Its historic fall in 2001 has ignited inflationary pressures, forcing the Reserve Bank to increase the repo rate by 400 basis points to 13,50% this year.
Following recent dovish statements by Finance Minister Trevor Manuel and central bank governor Tito Mboweni, economists believe that the risk of a fifth interest rate hike at the November 27 and 28 policy meeting has diminished.
Bonds were steady, with the yield on the short-dated R150, due 2005, bid at 11,67% from 11,695% on Monday. The longer-dated R153, due 2010, was flat at 11,18%. – Reuters