JOHANNESBURG (Reuters) -The South African rand firmed further against the dollar on Thursday after the central bank hiked its prime lending rate by 50 basis points to 4.75%, its biggest hike in more than six years, in a move to rein in inflation.
At 1530 GMT, the rand was trading at 15.8350 against the dollar, 1.66% stronger than its previous close.
Consumer price inflation remained at a five-year high of 5.9% in April, just within the central bank’s 3%-6% target range, according to data published by Statistics South Africa earlier on Wednesday.
South African Reserve Bank Governor Lesetja Kganyago said prices would continue to exert upside pressure on inflation due to the Ukraine crisis.
“In the near-term, headline inflation … is forecast to breach the target range in the second quarter,” he said, adding it would return closer to the mid-point in the fourth quarter of 2024.
The rand was further supported by a fall in the U.S. dolllar with the safe-haven dollar index falling as easing in Shanghai’s coronavirus lockdown lifted appetite for riskier assets in the global market.
“The MPC’s decision to hike the repo rate by 50 bps has provided a second tailwind for the rand, which was already strengthening on the back of the pullback in the USD,” Kieran Siney of ETM Analytics said in a comment emailed to Reuters.
In fixed income, the yield on the benchmark 2030 bond was up 11 basis points to 9.870%.
Shares on the Johannesburg Stock Exchange (JSE) slumped heavily on Thursday as a batch of corporate commentary from U.S. retailers fanned worries of inflation eating into the profits of companies and as shares of tech companies in Hong Kong fell.
The benchmark all-share index closed 1.2% weaker at 68,245 points while the blue-chip index of top 40 companies ended down 1.23% at 61,725 points.
Leading the decliners was Walmart-owned retailer Massmart, which fell 6.89% to 37.59 rand to a 1 year 5-month low after it said sales for the 19-week period ended May 8 decreased 0.2%.
(Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Toby Chopra, Jonathan Oatis and Alison Williams)
