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South Africa\u2019s rand rose after the nation\u2019s central bank boosted its main interest rate for the first time since 2016 and said its model signals four increases by the end of 2020.<\/p>\n
\u201cGiven the tone of the speech the probability for more tightening is higher than I thought earlier,\u201d said Guillaume Tresca, a senior emerging-market strategist at Credit Agricole SA.<\/p>\n
\u201cThe SARB will be really data dependent, driven by the rand movement.\u201d<\/p>\n
The currency extended its advance to as much as 1.3% against the dollar after the Monetary Policy Committee voted to increase the benchmark repurchase rate to 6.75% from 6.5%. The yield on the government\u2019s rand-denominated bonds due 2026 fell eight basis points to 8.96%.<\/p>\n
The central bank\u2019s decision to increase its benchmark rate on Thursday is especially notable because unlike policy makers across emerging markets, South Africa\u2019s regulator has resisted pressure to boost the rand\u2019s appeal with higher real rates as a rout swept across developing nations. Policy makers in Mexico, Indonesia and the Philippines lifted rates last week.<\/p>\n
\u201cDespite the muted economic activity and the inflation still in the target band range, the SARB is worried by the second-round effects and a de-anchoring of inflation expectations,\u201d Tresca said.<\/p>\n