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South African rand dips as some analysts predict rate cut next week

South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg, file. REUTERS/Siphiwe Sibeko

JOHANNESBURG (Reuters) - South Africa’s rand dipped early on Thursday, as some analysts predicted the central bank would cut its main lending rate next week to support the economy.

At 0715 GMT, the rand traded at 15.2800 versus the dollar, roughly 0.2% weaker than its previous close.

Recent data including car sales and manufacturing output suggest that Africa’s most industrialised economy was performing poorly in the fourth quarter of 2020.

Analysts at NKC African Economics said they were pencilling in a 25 basis point cut at the Reserve Bank’s monetary policy meeting that ends on Jan. 21, as the local economy was in need of stimulus.

They said inflation remained benign and was expected to stay below the mid-point of the bank’s target range well into 2022.

The Reserve Bank cut its repo rate by a cumulative 300 basis points last year to mitigate the impact of the COVID-19 pandemic.

At its final meeting of 2020, the bank kept the rate unchanged at 3.5% in a close call.

A rate cut typically causes the rand to weaken because it lessens the appeal of investing in rand assets.

Government bonds also slipped early on Thursday, with the yield on the 2030 bond up 2 basis points at 8.80%.

Reporting by Alexander Winning; Editing by Shailesh Kuber

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