USD/ZAR: Rand scales 15-week peak as investors look to SARB decision

Key points

The South African Rand advanced to a fresh 15-week high against the US Dollar on Thursday ahead of a rate decision by the South African Reserve Bank later in the day.

The SARB is largely expected to leave its benchmark interest rate without change at 8.25% at its July meeting, with the policy decision due at 13:00 GMT.

In May, the South African Reserve Bank raised its main lending rate by 50 basis points to 8.25%, which brought borrowing costs to their highest level since May 2009.

The SARB also revised up its 2023 inflation forecast to 6.2% from a previously expected annual level of 6%.

Data by Statistics South Africa showed on Wednesday that annual inflation in the country had eased further to a 19-month low of 5.4% in June from 6.3% in May.

Annual core inflation, which does not take into account prices of food, non-alcoholic beverages, fuel and energy, eased to 5% in June from 5.2% in the prior month.

Food inflation decelerated to an 11-month low of 11% in June, while prices rose at a slower rate for household contents & services, clothing, transport and restaurants & hotels.

Annual inflation has returned within the SARB’s target range of 3%-6%.

“SA June inflation at 5.4% (was) lower than consensus but on our forecast. To us (this) affirms the SARB MPC will not have to hike today,” Rand Merchant Bank analysts wrote in an investor note, cited by Reuters.

As of 9:05 GMT on Thursday USD/ZAR was edging down 0.41% to trade at 17.7823. Earlier in the session, the exotic Forex pair went down as low as 17.7527. The latter has been the pair’s weakest level since April 4th (17.7509).