Pound to Rand Exchange Rate Stronger as ZAR Reacts to SA Inflation Data

Pound to South African Rand exchange rate chart

The Rand was holding steady against rivals like the Pound and US Dollar as the local session began, with the USD to ZAR exchange rate trading in the region of 10.7455.

The emerging-market asset was deriving some support from the fact that the death of a Ukrainian soldier didn’t spark further conflict as tensions in the region appeared to ease.

Modest Rand movement later occurred as South Africa’s inflation figures were published.

The nation’s annual inflation rate advanced from 5.8 per cent in January to 5.9 per cent in February as a result of climbing fuel prices and a weaker local currency. Industry experts had forecast a reading of 5.6 per cent.

On the month prices rose by 1.1 per cent, up from 0.7 per cent in January but in line with economists’ expectations.

According to Bloomberg Businessweek, economist Johann Els said this of the report; ‘It’s not runaway inflation. The pass-through from a weaker Rand to inflation is still more limited than what you would expect. I see inflation peaking at 6.5 per cent mid-year […] I think [the SARB] may skip raising rates this month’.

South Africa’s Reserve Bank is due to announce its next rate decision on March 27th.

As trading progressed the Rand strengthened against the US Dollar thanks to a surprise increase in South Africa’s retail sales.

Figures compiled by Statistics South Africa showed that retail sales climbed to 6.8 per cent from 2.7 per cent in January rather than falling to 2.9 per cent as expected.

However, while the Rand was able to advance on the US Dollar the South African asset was struggling against the Pound.

The British asset was supported by UK employment data and the release of minutes from the Bank of England’s latest policy meeting.

Further Pound to Rand fluctuations could occur after Chancellor of the Exchequer George Osborne presents his budget.

A lack of additional South African data could restrain the Rand, but currency volatility may be triggered by the FOMC announcement, Eurozone consumer confidence figures and UK public sector net borrowing data before the weekend.