Rand at best level since Nenegate as market eyes another interest rate hike

JOHANNESBURG, Feb 18 (Reuters) – South Africa’s rand firmed to a seven-week high against the dollar on Thursday supported by expectations of interest rate hikes, while Gold Fields fell sharply as the stock market ended a recent rally.

Rand_Child_SliderAt 1536 GMT, the rand traded at 15.2800 versus the dollar, 1.2 percent firmer compared with Wednesday’s close and trading at its strongest level since Dec. 29.

The currency extended gains from the previous session after higher-than-expected inflation bolstered the case for further local interest rate hikes.

“We’ve got to be careful in getting overly optimistic because we have a huge event risk ahead, there is a budget coming up next week,” Bidvest Bank’s chief dealer Ion de Vleeschauwer said.

“But for now the market seems happy to buy the rand just because of the interest rate differentials that could potentially be in its favour because of the high inflation numbers.”

South African Finance Minister Pravin Gordhan will present a three-year budget to parliament on Feb. 24.

Government bonds weakened with the yield on the benchmark instrument due in 2026 up 1 basis point to 9.095 percent.

On the equities market, the blue-chip Top-40 index fell 0.29 percent to 44,461 points and the broader All-share index shed 0.39 percent to 49 857.

“The buying pressure that pushed the JSE up so strongly in the first half of this week is waning,” Inkunzi Investments’ trader Petri Redelinghuys said.

Clothing retailer Truworths shares jumped 2 percent to 95.70 rand after the company said half-year sales grew by 36 percent to 8.5 billion rand.

On the downside, Gold Fields fell nearly 15 percent to 55.99 rand after posting a 47 percent decline in full-year earnings due to falling bullion prices.

Trade was active with more than 338 million shares changing hands, above last year’s daily average of 296 million shares.