South African rand falls as inflation slows, stocks rise

THE South African rand weakened in afternoon trade on Wednesday, as data showed consumer inflation slowed in January, lowering expectations of aggressive domestic interest rates hikes.

At 1425 GMT the rand ZAR=D3 traded at 15.1500 against the dollar, 0.3% weaker than Tuesday’s close.

South Africa’s January inflation ZACPIY=ECI fell to 5.7% year on year in January from 5.9% in December, though still near the upper end of the South African Reserve Bank’s (SARB’s) 3%-6% target range.

“Policymakers will probably keep raising interest rates gradually to provide as much support to the economy as possible, rather than the aggressive tightening cycle that investors appear to be anticipating,” Virág Fórizs, Africa economist at Capital Economics, said in a note.

The SARB has raised its main lending rate ZAREPO=ECI at its last two meetings in November and January. Some economists predict another hike at its next meeting in March, a decision scheduled the week after the U.S. Federal Reserve