JOHANNESBURG, July 17 (Reuters) – The South African rand weakened on Friday as investors turned their attention to next week’s inflation data and monetary policy meeting, where the interest rate decision is expected to be a close call.
- The rand traded at 16.57 against the dollar at 1306 GMT, roughly down 1% from its previous close.
- The currency has remained under pressure for most of the week as tensions in the Middle East weighed on risk sentiment, pushing the currency to its weakest level this month.
- Traders are now focused on June consumer inflation data due on Wednesday for fresh clues on the South African Reserve Bank’s (SARB) plans on interest rates.
- Headline inflation rose less than expected to 4.5% year on year in May, from 4.0% in April. Analysts had forecast 4.7% for the May figure.
- Johann Els, chief economist at PSG Financial Services, expects inflation to edge up to 4.7% in June and for the SARB to leave its main lending rate unchanged at next week’s meeting.
- However, Els said the renewed conflict in the Middle East and resulting rise in oil prices had complicated the policy outlook, keeping an increase of 25 basis points on the table.
- The central bank raised its main lending rate for the first time in three years at its previous meeting.
- On the Johannesburg Stock Exchange, the Top-40 index was down 1.2%.
- The yield on South Africa’s benchmark 2035 government bond dropped by 9 basis points to 8.54%.
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