JOHANNESBURG (Reuters) -The South African rand recouped some losses against a weaker dollar on Wednesday even as national inflation slowed, fuelling hopes of an interest rate cut by the South African Reserve Bank (SARB).
At 1402 GMT, the rand traded at 18.3125 against the U.S. dollar, about 0.5% stronger than its previous close. The rand tumbled against the U.S. currency on Tuesday after trading weaker for much of last week amid risk-off sentiment.
The dollar index was last down 0.31% against a basket of currencies.
Statistics South Africa data showed headline consumer inflation eased to 5.1% year-on-year in June from 5.2% in May and core inflation softened, clearing the path for the central bank to cut rates at its next meeting in September, economists said.
“We think the SARB will be in position to embark on an easing cycle at its next meeting in September with a 25 bp cut, to 8.00%,” said David Omojomolo, Africa economist at Capital Economics.
“The shift down in core inflation to the mid-point of the SARB’s 4.5% target will almost certainly be welcomed by policymakers,” Omojomolo said.
Inflation has been above 5% since September 2023, and the central bank estimates that inflation will only stabilise at its targeted 4.5% over the next few quarters.
Monetary policy has remained tight as the central bank tries to steer inflation back towards the midpoint of its 3%-6% target range.
Investor focus will be on June producer inflation figures due on Thursday.
On the stock market, the Top-40 index was last down 0.2%.
South Africa’s benchmark 2030 government bond was weaker, as the yield rose 1 basis point to 9.470%.
(Reporting by Tannur Anders and Bhargav Acharya; Editing by Andrew Heavens and Tomasz Janowski)
