The South African rand declined following the central bank’s decision to keep the interest rate steady at 7.50%. The US dollar strengthened against a basket of currencies following the Federal Reserve’s announcements. Market reactions included a decrease in the Top-40 index and a slight drop in government bond yields.
On March 20, 2023, the South African rand experienced a decline after the South African Reserve Bank (SARB) decided to maintain the main interest rate steady at 7.50%, as anticipated. As of 1352 GMT, the rand was trading at 18.22 against the US dollar, marking a decrease of approximately 0.5% compared to its previous closing figures.
Additionally, the US dollar saw an increase of around 0.7% against other currencies, attributed to the Federal Reserve’s recent announcement to keep interest rates unchanged while also revising down its growth forecast. The decision by SARB to pause rate cuts was influenced by ongoing risks related to international trade tensions and a stalled national budget, despite the successful management of inflation rates.
Central bank Governor Lesetja Kganyago emphasized the potential for future policy adjustments by leading central banks but indicated that elevated interest rates would likely persist due to emerging inflationary pressures. Consensus among economists surveyed by Reuters pointed toward an expectation of steady interest rates.
In terms of the stock market, South Africa’s Top-40 index demonstrated a decline of approximately 0.8%. Conversely, the yield on South Africa’s benchmark 2030 government bond decreased by 3.5 basis points, reaching 9.05%.
The South African rand weakened as the central bank held interest rates steady, reflecting ongoing economic concerns. While the dollar strengthened, affected by the Federal Reserve’s decisions, the SARB maintained its position amidst existing domestic challenges. The outlook remains cautious, with expectations of high interest rates persisting amid inflation risks, as remarked by Governor Kganyago.
Original Source: www.cnbcafrica.com
