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South Africa’s rand on firmer footing after rate hike, stocks also gain

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand traded at two-week highs against the dollar on Friday, still boosted by the central bank unexpectedly raising interest rates the previous day to curb inflation pressures.

Stocks ended slightly higher, led by Mr Price as investors piled into the discount clothes retailer after a broker upgraded the stock to ‘buy’.

The rand climbed to 13.8900 per dollar during Friday’s session, its strongest since Nov. 6, and was trading at 13.9300 by 1550 GMT, up 0.7 percent on the day.

This was after the central bank raised the benchmark repo rate by 25 basis points on Thursday, warning that failure to act on inflation risks could worsen the country’s already weak growth.

Traders and analysts however warned the currency could come under renewed pressure should the U.S. Federal Reserve hike lending rates in the world’s biggest economy in December, as widely expected.

“The rand is in an interesting attempt to establish a new, bullish channel, but it is unlikely to persist through

December, as market jitters arise again in the lead up to the December FOMC (Federal Open Market Committee),” Investec analyst Annabel Bishop said.

“While it could test 13.5000/dollar, it could equally show a lightening turnaround to attempt to test the level a rand higher.”

The rand has given up nearly 17 percent of its value against the dollar this year, mainly because investors are betting on higher U.S. rates dumping emerging market assets which offer relatively higher yields but also carry more risk.

On the local bourse, the blue-chip JSE Top-40 index added 0.24 percent to 46,963 and the broader All-Share index gained by the same margin to 52,240.

Mr Price, which also reported a 16 percent increase in half-year earnings this week, jumped 8.7 percent to 200.01 rand, booking its biggest daily percentage gain in more than seven years.

Brokers at HSBC raised their rating on the stock to “buy” from “hold” and upgraded their price target to 200 rand from 195.

Other gainers included Tiger Brands, up 5.9 percent to 357 rand, a level last seen in February. Investors have welcomed news that Tiger Brands will no longer provide funding to its money-losing Nigerian unit.

On the downside, MTN Group was off 1.25 percent at 142 rand as it battles to reduce a $5.2 billion fine in Nigeria.

Overall, traders took their cue from higher overseas markets, where sentiment was helped by growing expectations of more European Central Bank stimulus.

Trade was robust with more than 328 million shares changing hands, well above last year’s daily average of 183 million shares.

The bullish tone on South African markets extended to fixed income, where the yield for paper due in 2026 reached its lowest since Nov. 4 at 8.4 percent.

It ended Friday’s session at 8.415 percent, down 4 basis points from Thursday.

 

(Reporting by Stella Mapenzauswa and Tiisetso Motsoeneng; Editing by Andrew Roche)

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South Africa’s rand, stocks strengthen after rate hike

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand hit a two-week high against the dollar on Thursday after the central bank governor raised the repo rate, while shares rose led by Gold Fields which reported a much-improved quarter.

By 1548 GMT the rand was at 14.0020 versus the greenback, up 1.16 percent from Wednesday’s close. The currency had earlier touched a session low of 14.2155 to the dollar.

The central bank lifted interest rates by 25 basis points to 6.25 percent, to curb future inflation risks.

“One thing possibly working on the rand’ s favour on a relative basis is that the SARB has been one of the more proactive central banks in EM in that it has started its hiking cycle before the Fed,” HSBC Bank senior currency strategist Dominic Bunning said.

“This may provide some breathing room for the currency relative to others whose central banks might be seen as more “behind the curve”, he said.

Government bonds however, weakened across the curve with the yield on the benchmark government bond maturing in 2026 adding 1 basis points at 8.465 percent after shedding more than 9 basis points after the rate decision.

On the stock market, the benchmark Top-40 index rose 0.83 percent to 46,851 points while the All-share index climbed 0.89 percent to 52,116 points.

Shares in Gold Fields, which also reported flat normalised earnings for the third quarter, closed 17 percent higher at 36.26 rand, after rising as much as 29 percent, when it said it expected further improvements in its South Deep mine while reviewing the future of its costly Damang operations.

“Gold production at South Deep is up quite nicely in quarter and guidance for the year is decent,” said Noah Capital Markets analyst Rene Hochreiter.

Trade was brisk with 233 million shares changing hands, compared to last year’s daily average of 187 million shares.

 

(Reporting by Nqobile Dludla and Zandi Shabalala; Editing by James Macharia)

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Kenya central bank holds rate, says exchange rate steady

Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s central bank held its benchmark lending rate at 11.50 percent, saying the exchange rate had stabilised and the current account deficit had narrowed, the bank’s Monetary Policy Committee (MPC) said on Tuesday.

The decision was in line with a Reuters poll of 10 analysts in which eight had expected no change in the rate.

The bank raised the lending rate by 300 basis points earlier this year in part to support the weakening shilling.

As well as noting that the shilling had stabilised, the committee said in a statement that lower oil prices and a slowdown in consumer demand had helped narrow the currency account deficit. The trade gap has put pressure on the currency.

“The committee concluded that the monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations,” the committee said.

 

(Reporting by Duncan Miriri; Editing by Edmund Blair, Reuters)

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“Don’t panic,” Nigerian central bank head urges banks

Comments (0) Africa, Business, Latest Updates from Reuters, Politics

ABUJA (Reuters) – Nigerian central bank Governor Godwin Emefiele ruled out on Thursday a naira devaluation and told people not to panic about the government shifting its bank accounts to the central bank, a move that would drain┬ábillions of dollars from the financial system.

In an interview with Reuters, Emefiele said he was ready to inject liquidity if needed into the interbank market, which dried up this week following a directive to government departments to move their accounts into a “Treasury Single Account” at the central bank.

The policy is part of new President Muhammadu Buhari’s drive to fight corruption, but analysts say it could suck up as much as 10 percent of banking sector deposits in Africa’s biggest economy – hammering banks’ liquidity ratios.

Amid confusion over implementation of the policy, overnight interbank lending rates spiked to 200 percent this week, but Emefiele denied the policy had provoked a liquidity crisis.

“There is no shortage of liquidity,” he said, pointing to an oversubscribed sale of treasury bills on Wednesday. “A spike is a momentary action. It’s sentiment,” he said.

Emefiele said less than one trillion naira ($5 billion) would be moved into the single account but did not give details.

Emefiele was also emphatic about maintaining the naira currency – which has dived in the past year due to a collapse in oil revenues – at its current level of 197 to the dollar.

“There will not be a devaluation because right now the currency is appropriately priced,” he said.

In a series of unconventional interventions to protect the naira, the bank has blocked access to foreign currency to import items ranging from soap and toothpicks to cement and private jets.

Emefiele said the list of restricted items could be expanded to encourage local production.

He rejected claims by Nigerian firms about the difficulties of getting hold of dollars and ruled out the possibility of a default by any company with dollar-denominated debt.

(By Julia Payne and Ulf Laessing, Reuters)

 

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