JOHANNESBURG (Reuters) -The South African rand strengthened on Wednesday as inflation rose only modestly, keeping the central bank on track to continue cutting interest rates, while the local stock market scaled a new record high.
At 1445 GMT, the rand traded at 17.5550 against the U.S. dollar, up about 0.2% on Tuesday’s closing level.
South African inflation rose to 3.0% year on year in June from 2.8% in May, in line with forecasts, which analysts said left room for the central bank to ease policy further. The bank holds a rate-setting meeting next week.
The Johannesburg Stock Exchange’s All-Share Index crossed 100,000 points for the first time, last trading up 0.8%.
Stephan Erasmus, investment analyst at Anchor Capital, said the bourse’s strong performance so far this year – the All-Share Index is up roughly 19% – had been driven by a few standout performers, including mining and telecoms stocks, and heavyweight Naspers.
Kevin Lings, chief economist at Stanlib, said the exchange had been lifted by a stronger gold price, the fact that some asset managers thought local valuations looked cheap compared to U.S. equities, and a view held by some that the economy was not in as bad shape as official data suggests.
Statistics agency data last month showed Africa’s most industrialised economy stagnated in the first quarter, eking out quarter-on-quarter growth of 0.1%.
But the outgoing chief executive of local bank Capitec has since said he thought economic activity in the informal sector was underestimated, in comments that Lings said had resonated with some fund managers.
Later on Wednesday lawmakers are expected to pass the Appropriation Bill, which allocates funds to government departments and entities, bringing to an end months of disputes between coalition partners over the budget.
The benchmark 2035 government bond gained slightly, with the yield down 3.5 basis points to 9.81%.
(Reporting by Alexander Winning and Nqobile Dludla. Editing by Mark Potter)
