The rand headed for a fifth weekly decline, as Cyprus struggles to meet a European Central Bank deadline to agree on a bailout package, damping demand for riskier assets.
South Africa’s currency declined less than 0.1 percent to 9.3275 per dollar as of 9:51 a.m. in Johannesburg, bringing its retreat this week to 1.5 percent. The rand slumped to 9.3666, the weakest level since April 2009, yesterday. Yields on benchmark 10.5 percent bonds due December 2026 were unchanged at 7.50 percent after rising 10 basis points this week.
Cypriot lawmakers will begin a debate today on legislation to unlock bailout funds and prevent a financial collapse with a European Central Bank deadline to cut off funding for its lenders in three days. South Africa’s Reserve Bank kept its benchmark interest rate unchanged for a fourth meeting on March 20 as a slump in the rand stoked inflation, preventing policy makers from providing further stimulus to spur economic growth. Yesterday was a public holiday in South Africa.
“With neither monetary nor fiscal policy expected to change any time soon, South Africa’s imbalances are set to remain intact,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “The vulnerability of the rand will therefore remain a feature that continues to leave the rand more sensitive to foreign developments such as the debt crisis in Cyprus.”
While the weaker currency posed risks to inflation, it provided an opportunity for the nation’s manufacturers to become more competitive in export markets, Reserve Bank Governor Gill Marcus said. The consumer inflation rate rose to 5.9 percent in February, from 5.4 percent. The central bank aims to keep inflation within a 3 to 6 percent target range.
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