JOHANNESBURG (Reuters) -The South African rand was slightly stronger on Monday after Fitch affirmed South Africa’s “BB-” credit rating with a “stable” outlook, despite an ongoing power crisis.
This week’s major focus will be local inflation data out on Wednesday and an interest rate announcement on Thursday.
At 1541 GMT, the rand traded at 18.0650 against the dollar, about 0.1% stronger than its previous close.
The rand gained around 4% against the U.S. currency last week, bolstered by bets that the U.S. Federal Reserve will increase interest rates only once more because of cooling inflation in the world’s largest economy.
“Locally, everyone is looking ahead to Thursday’s MPC (monetary policy committee),” said Rand Merchant Bank in a note.
A majority of economists polled by Reuters predict the South African Reserve Bank (SARB) will leave its main interest rate unchanged at 8.25%, although it is still a close call with a significant minority expecting another 25-basis-point hike.
Wednesday’s June Consumer Price Index (CPI) data could influence the SARB’s thinking.
Rand Merchant Bank predicts a deceleration in headline inflation to 5.4% year on year in June from 6.3% in May, which would take inflation back within the SARB’s 3%-6% target band for the first time since April 2022.
“A figure on our forecast would help the view of no hike from the SARB and affirm our forecast that inflation will average 5.9% this year, i.e., within the target band,” RMB analysts said.
Shares on the Johannesburg Stock Exchange ended the day down, with the blue-chip Top-40 index closing 0.68% lower and the broader all-share index 0.64% lower.
South Africa’s benchmark 2030 government bond was marginally stronger, with the yield down 3 basis points at 10.445%.
(Reporting by Tannur Anders and Nellie Peyton;Editing by Alexander Winning, William Maclean)
