Stocks extend rally; South African rand slips ahead of central bank decision

PUBLISHED: Wed, 25 Jan 2023 10:34:38 GMT
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Key Points
  • Hungarian forint eases after sharp gains in the previous session
  • Sri Lanka c.bank holds rates as it awaits crucial IMF deal
  • Russian rouble firms after hitting one-week low vs dollar
  • EM currencies, stocks up 0.1%
South African Rand coins are seen in this illustration picture taken October 28, 2020. REUTERS/Mike Hutchings

Jan 25 (Reuters) – The South African rand edged down with investors cautious ahead of the central bank’s policy decision this week, while stocks in the emerging markets briefly hit a seven-month high as many Asian markets resumed trading after a holiday-extended weekend.

The rand ZAR= inched 0.1% lower against the greenback, as of 0802 GMT on Wednesday.

The South African Reserve Bank is expected to raise interest rates for the last time on Thursday in this cycle in anticipation of slower inflation, a Reuters poll showed.

“With price pressures continuing to soften, we expect policymakers in South Africa to slow the pace of their tightening cycle by delivering a 50bp interest rate hike, to 7.50%, on Thursday,” said Virág Fórizs, Africa economist at Capital Economics.

“Hawkish signals from the Reserve Bank are likely to provide some support to the struggling rand.”

Overall, the MSCI’s index for emerging market currencies .MIEM00000CUS edged 0.1% higher.

Regional stocks .MSCIEF added 0.1%, extending gains for a fourth straight session and briefly touching their highest level since last June.

The Turkish lira edged up against the dollar.

Business confidence among Turkish manufacturers rose to 101.7 points in January, compared with 97.8 points in the prior month, central bank data showed.

In central and eastern Europe, the Hungarian forint EURHUF= slipped 0.1% against the euro, after jumping 1.5% in the previous session as the Hungarian central bank held rates steady and pledged to keep tight monetary conditions.

The Polish zloty EURPLN= eased 0.1%, while the Czech crown EURCZK= was flat against the euro.

The Czech National Bank’s interest rates have reached a level at which they subdue demand pressures, central bank board member Oldrich Dedek was quoted as saying on Wednesday.

Russia’s rouble RUBUTSTN=MCX firmed in early trading against the dollar, continuing to move in a relatively narrow range as exporters gear up to pay supportive month-end taxes.

In Asia, the Thai baht THB=TH slipped after its central bank raised its key interest rate by 25 basis points for a fourth consecutive meeting.

Sri Lanka’s central bank held interest rates steady for a third straight meeting, as widely expected, saying the prevailing tight monetary stance is crucial to taming still-high inflation and restoring economic stability.

The Pakistani rupee fell after foreign exchange companies removed a cap on the currency, saying it was creating “artificial” distortions in the market as the South Asian country struggles to escape a deepening economic crisis.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets Read full story

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