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Rand strengthens after Sarb cuts repo rate, stocks fall

Hits R17.51 to the dollar, its best level in more than a month.
The JSE All-Share Index fell 2.15%, while the Top 40 closed down 2.37%. Image: Bloomberg

South Africa’s rand rallied on Thursday after the country’s central bank cut its main lending rate by 50 basis points, while stocks fell on concerns over the long-term impact of the new coronavirus and simmering US-China tensions.

At 1653 GMT, the rand was 1.57% firmer at R17.64 per US dollar after hitting R17.51, its best level in more than a month.

The central bank cut its main lending rate by 50 basis points to 3.75% on Thursday in an effort to shield the economy from the impact of the virus.

Rate cuts this year now total 275 basis points.

“With inflation expected to continue to slow in coming months, further cuts might be on the cards at the June MPC [Monetary Policy Committee] meeting as well as later in the year,” executive director at Peregrine Treasury Solutions Paul Muller said in a note.

The reappearance of tensions between the US and China, the world’s two top economies, has capped gains however, after US President Donald Trump’s attacks on Beijing’s handling of the coronavirus outbreak spooked already nervous investors.

Bonds weakened, with the yield on the government issue due in 2030 up 8.5 bps to 7.3%.

On the stock market, the benchmark JSE All-Share Index fell 2.15% to end at 51 023 points, while the top 40 companies index closed down 2.37% to 47 232 points.

Bullion shares fell 7.51% with Gold Fields down 6.96% and Harmony Gold 6.95% lower on the back of a weaker spot gold price.

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”Top pickers and bottom pickers become cotton pickers”

I commented on the lower tops and lower bottoms of the USD/ZAR chart and predicted that the ZAR could strengthen to 17.50- if the resistance at 18 gave away. Would this have happened if the SARB didn’t cut the repo rate – who knows but my gues is yes?

Some range trading from here although I think some very nervous Delta hedging to be seen in the days to come!

End of comments.

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