South Africa's currency weakened on Thursday on the back of a strong dollar as the local central bank's largely expected move to hold its key interest rate steady had a muted impact on the currency.
The rand traded at 17.9700 against the dollar at 1556 GMT, 0.56% weaker than its previous close as the greenback gained after data from the U.S showed the number of people claiming unemployment benefits haveThat sparked concerns the Federal Reserve might continue its rate hike measures after next week's almost expected 25 basis points hike.
But bank Governor Lesetja Kganyago strongly cautioned against construing the move as a beginning of its rate pause cycle, unlike what many central banks across the world are expected to do. "Have interest rates peaked? The answer is a resounding no," he said, adding the current rate reflected elevated inflation expectations and outlook."We think that inflation will continue to moderate and it will reach the mid point of the bank's target range sooner than expected," said Khanyisa Phika, an economist at Alexforbes, a South African financial services firm.The SARB strives to keep inflation at the mid-point of its 3%-6% target range.
Local lender FNB said it expected rate hike cycle to resume as inflationary pressures continue to hover in the midst of widening current account deficit and its funding concerns.
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