Rand eyes R15 vs the dollar ahead of Zuma vote
The rand softened against the US dollar in morning trade on Tuesday ahead of a vote in Parliament to have president Jacob Zuma removed from office.
At 09h45, the rand traded almost a percent weaker at 14.90 to the dollar, R21.16 against the British Pound, and R16.93 against the euro.
The South African Reserve Bank said on Monday that it would continue raising interest rates in order to keep rising inflation in check despite the costs to the economy.
The bank has raised benchmark lending rates by a total of 200 basis points in the last two years as it combats accelerating consumer prices amid a weakening currency, drought and above-inflation wage hikes.
“Tolerating additional inflation in the short run could require larger interest rate adjustments later, with proportionally greater cost for the economy,” the bank said.
The bank expects headline inflation in Africa’s most industrialised economy to peak at 7.8% in 2016, well outside the limit of its upper target of 6%.
Sarb said the sharp fall of the currency, by about 20% against the dollar since December, had been large and sustained enough to have a lasting effect on the economy and monetary policy.
The bank in March trimmed its growth forecast to 0.8% for 2016 from the 1.5% it forecast in November, saying that household debt, electricity shortages and weak global growth were persistent strains on growth.
Reuters reported that Zuma has the backing of the African National Congress (ANC), which he secured on Friday after an apology for his role in upgrades to his private residency in Nkandla, which the ANC National Working Committee (NWC) has accepted.
Reuters noted that the motion to remove Zuma is likely to fail in the assembly thanks to the ANC’s majority – 62% of the 400-seat assembly.
Reporting with News24
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