Rand rallies to best level since 2015

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Rand rallies to best level since 2015

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Published Date: 2018-01-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Rand rallies to best level since 2015

The rand's strength is expected to result in lower fuel prices after December's petrol-price hike fed inflation

The rand broke below R12 to the dollar for the first time since May 2015 yesterday on hopes the ANC's new leadership will stamp out corruption and implement policies that stimulate the economy. By noon, the rand had gained 0.7% versus the dollar to trade at R11.94. It strengthened by 2% against the euro to R14.74 and was 0.6% firmer to the pound at R16.83. It's also hoped that the changes will stave off a further ratings downgrade by Moody's Investor Service, the last of the big three credit ratings agencies to keep the country's debt at investment grade.

According to Bloomberg, the rand's 15% gain over the past three months makes it the best performer of 31 currencies it tracks.

Positive comments from the government's delegation at the World Economic Forum in Davos about ending corruption, repairing governance at state-owned enterprises and the health of public finances, maintaining key institutional strengths and promoting economic growth have also assisted in the lift in the domestic currency, said Investec chief economist Annabel Bishop.

TreasuryOne said external factors were assisting too.

The dollar is trading at a three-year low against a basket of currencies after declining by 10% last year. Bishop said economic policy concerns have been weighing on the dollar, as well as ongoing revelations on US political issues.

Earlier, Statistics South Africa reported that the country's consumer price index accelerated to 4.7% year-on-year in December from November's 4.6% reading. Month-on-month, consumer inflation grew by 0.5%. Core inflation, which excludes food and energy prices, slowed to 4.2% from 4.4% in November.

FNB senior economist Jason Muscat said the bump in the inflation print stemmed almost entirely from petrol price inflation of 14.2% following December's petrol price increase.

The rand retraced some of its gains by 5pm to trade at R11.96 to the dollar, R14.81 against the euro and R16.98 to the pound.



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