Rand firms after CPI slows, stocks up

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JOHANNESBURG – The rand marked a fourth straight session of gains against the dollar on Wednesday, aided by a surprise slowing of inflation locally and improved risk conditions abroad.

Stocks benefited from rising global markets as investors grew more optimistic Britain would vote to remain in the European Union in its referendum on Thursday.

Investors largely ignored election-linked violence in the capital Pretoria where two people were shot dead.

By 1500 GMT the rand had firmed 0.4% to 14.6795 per dollar, climbing to a new seven-week peak as the greenback faltered after the United States central bank poured cold water on the chances of a rate hike in July.

The rand kicked off the local trade flat, and crucially above technical resistance at 14.7000, before resuming the previous session’s rally after consumer prices in May unexpectedly slowed to 6.1% year-on-year.

“Recent rand appreciation and dissipating food inflation threats suggest that the peak may not be as high as initially envisaged,” senior analyst at First National Bank Jason Muscat said.

The rand has gained nearly four percent this week, rallying along with other emerging risk assets as the likelihood increased that the referendum on EU membership on Thursday would see Britain remain part of the economic bloc.

Government bonds also rallied, with the issue due in 2026 falling 11.5 basis points to 8.875%.

On the bourse, the benchmark Top-40 index climbed 1.2% to 47,475 points while the All-Share index rose 1.1% to 53,557 points.

“European and emerging markets are pricing in a vote to stay and as a result we are seeing some risk on buying in those markets,” said BP Bernstein trader Vasili Tirasis.

The biggest gainer among the blue-chips was food supplier Bidcorp, which earns nearly half its revenue in Britain, climbing 4.8% to R282.

Barclays Africa Group advanced 4.2% to R151 and London-listed Old Mutual rose 4.3% to R42.10.

Trade volumes were below par, with around 237 million shares changing hands compared with last year’s daily average of 296 million shares.

EWN

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