EM-rand, Turkish lira slip ahead of cenbank verdicts

Turkey’s battered lira slipped 0.4%, hovering near its weakest level since the December currency crisis.
Image: Waldo Swiegers / Bloomberg

Currencies in Turkey and South Africa weakened against the dollar on Thursday ahead of monetary policy decisions, while China’s yuan slipped to a near one-week low on simmering risks in the country’s property sector.

Turkey’s battered lira slipped 0.4%, hovering near its weakest level since the December currency crisis, as caution prevailed ahead of a rate-setting meeting where the central bank is likely to stand pat on its benchmark rate despite spiralling inflation.

South Africa’s rand fell 0.5% to trade at R17.23 to the dollar. The South African Reserve Bank (Sarb) is likely to announce a further 50 basis point rise in the repo rate, which would mark the fifth hike in a row.

“The case for further South African policy tightening is clear – inflation is now running outside of the target range,” said Miyelani Maluleke, a macroeconomist at Absa Corporate and Investment Banking.

“The Sarb will want to get on top of that to ensure that second-round effects are contained and inflation doesn’t become more entrenched.”

On Wednesday, data from Africa’s most industrialised nation showed that headline consumer inflation quickened more than forecast to 7.4% year-on-year in June, hitting the highest since May 2009.

The details of the CPI data raise the possibility that we could see a more aggressive move from Sarb, Maluluke added.

“Still, there’s scope for the ZAR to come back to about 16 by the end of the year,” Maluleke said.

The rand has lost 7% so far this year, while broader currencies are down 5%, as regional assets suffer against a surging dollar amid rising inflationary pressures and fears of a global recession.

Elsewhere, Ukraine’s central bank devalued the by 25% against the dollar due to the impact of the war with Russia, setting the new hryvnia rate at 36.5686 to the dollar.

China’s yuan slipped after the central bank set a weaker daily midpoint rate, while risks in the property sector dampened sentiment. Some suppliers to China Evergrande Group said they would stop repaying bank loans to protest against non-payment by the distressed property giant.

Indonesia’s central bank kept its benchmark interest rate unchanged at a record low, as expected, saying the level remained consistent with its inflation target, amid growing calls for a 25 basis point hike. The rupiah fell 0.3%.

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