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South African Rand Gains Despite Slowing Inflation

August 21, 2019 at 16:45 by Vladimir Vyun

African cape buffalo on 100-rand noteThe South African rand gained against the US dollar and the euro today despite South Africa’s slowing inflation. Market analysts are skeptical, though, about the rand’s ability to maintain the rally for a long time.

South Africa’s annual inflation slowed to 4.0% in July from 4.5% in June. It was noticeably below the consensus forecast of 4.4% but within the central bank’s target range of 3%-6%. The figure was the lowest since January. Core annual inflation slowed as well, falling from 4.3% to 4.2%, while experts had expected it to stay unchanged.

Analysts think that interest rate cuts of the Federal Reserve will result in an inflow of funds into emerging economies, boosting their respective currencies. But that does not necessarily apply to the rand as specialists argue that political corruption in the ruling ANC party can prevent implementation of necessary economic reforms, hurting appeal of South African assets to investors.

USD/ZAR dropped from 15.3523 to 15.2051 as of 16:44 GMT today. EUR/ZAR declined from 17.0436 to 16.8813. At the same time, GBP/ZAR rallied from 17.8060 to 18.0295.

If you have any questions, comments, or opinions regarding the South African Rand, feel free to post them using the commentary form below.

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