(Updates rand, bonds; adds stocks)
JOHANNESBURG, Nov 25 (Reuters) - South Africa’s rand dipped on Wednesday, erasing gains earlier in the session, after data showed consumer price inflation in October rose, but not by enough to dampen expectations of further monetary policy easing.
At 1505 GMT, the rand traded at 15.2800 versus the U.S. dollar, 0.54% weaker than its previous close.
South Africa’s consumer price index (CPI) rose 3.3% in annual terms, versus analysts’ expectations for a 3.1% rise and a 3.0% reading in September, well within the central bank’s target of 3-6%.
“Policymakers are unlikely to be overly concerned by rising inflation and the divisions on the monetary policy committee suggest that additional monetary easing cannot be fully dismissed,” Virág Fórizs, Africa economist at Capital Economics, said in a note.
“Even if further rate cuts don’t materialise, low inflation and a sluggish recovery means that monetary conditions are likely to be kept loose for some time.”
The central bank kept its main lending rate on hold last week at 3.5%, and one of its deputy governors said this week that a full economic recovery from the effects of COVID-19 pandemic was likely to be “slow and difficult”.
Demand for the rand and domestic bonds this year has largely been supported by the elevated yield on offer due to high interest rates compared with developed markets. Lower rates would diminish the currency’s carry-trade appeal.
Stocks had a largely mixed day, with the two main indexes swinging between positive and negative territories and ending broadly stable amid the stronger local inflation data and rising global coronavirus cases.
The benchmark all-share index closed down 0.03% at 57,742.19 points. The blue-chip top 40 companies index ended 0.2% lower at 52,941 points.
Government bonds weakened, with the yield on the 2030 instrument rising by 2.5 basis points to 8.885%. (Reporting by Olivia Kumwenda-Mtambo; Editing by Mark Potter)
Our Standards: The Thomson Reuters Trust Principles.