Rand weakens after inflation jumps, stocks to inch up

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January 21, 2016 11:37 AM

At 0645 GMT the rand had slipped 0.6 percent to 16.8500 per dollar, edging closer to the psychologically crucial 17.00 mark it breached on Jan. 10 on its way to an all-time low of 17.9950.

South African rand notes in a file photo. REUTERS/Siphiwe Sibeko

South Africa's rand sank on Thursday, pressured by data that showed inflation had jumped in December and which was released a week before the central bank is due to decide on interest rates at its first 2016 policy meeting.

The JSE securities exchange's Top-40 futures index was up 0.4 percent, suggesting the local bourse would open slightly higher at 0700 GMT.

Yields on government bonds inched lower, shedding 2.5 basis points to 9.68 percent.

Data released on Wednesday showed headline inflation had jumped to 5.2 percent in December from 4.8 percent in the previous month, spurring South African Reserve Bank (SARB) Governor Lesetja Kganyago to concede that the inflation outlook had deteriorated since the bank's last meeting.

The bank raised benchmark lending rates by a total of 50 basis points in 2015, and some analysts predicted another rate increase.

"There is very good chance that the Monetary Policy Committee will be forced to act. We expect an interest rate hike that may be as large as 50 basis points," said analysts at research house NKC African Economics.

A report by Washington-based Institute of International Finance, which tracks international investment flows, warned on Wednesday that South Africa along with BRICS partner Brazil was among the countries most vulnerable to large investment outflows due to slowing growth in China and poor fundamentals.

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