JOHANNESBURG (Reuters) -South Africa’s rand strengthened on Wednesday as hawkish comments from the U.S. Federal Reserve fed global risk appetite and investors digested steady domestic inflation data.
At 1501 GMT, the rand was up 0.66% at 14.7473 to the dollar, extending five-month highs scaled in the previous session thanks to gains in gold and expectations that the central bank will raise interest rates on Thursday.
“Markets turned more positive on riskier assets yesterday, and high commodity prices drove developments. The rand and other commodity-driven currencies relished the opportunity to make further gains,” said Bianca Botes, director at Citadel Global.
Fed Chair Jerome Powell said the U.S. central bank could move “more aggressively” to raise rates to fight inflation, possibly hiking by more than 25 basis points at one or more meetings this year.
The rand was also supported by higher prices of gold, of which South Africa is a major exporter. Spot gold was up about 0.5%, as investors worldwide looked to shield against rising inflation.
Domestic inflation held steady in February at 5.7%, according to consumer price numbers published by Statistics South Africa earlier on Wednesday.
On Thursday, the South African Reserve Bank is expected to hike its repo rate to 4.25%, according to a Reuters poll of economists.
In fixed income, the yield on the benchmark 2030 government bond was down 4.5 basis points to 9.740%.
The Johannesburg All-Share Index closed 1.21% lower at 74,838, while the blue-chip top 40 index ended down 1.32% at 68,235.
Naspers Ltd, the top investor in Tencent, fell 9.45%, after the Chinese social media giant posted its slowest quarterly sales rise since going public in 2004.
Naspers holds up to 28.8% in Tencent through Prosus, its Amsterdam- and JSE-listed company.
Prosus, down 8.86%, and Naspers together account for more than 7% of the benchmark index, heavily impacting the stock market’s performance.
(Reporting by Olivia Kumwenda-Mtambo, Rachel Savage and Nqobile Dludla; Editing by Sherry Jacob-Phillips and Devika Syamnath)
