Tepid US inflation lights a fire under rand
The rand extended earlier gains on Friday afternoon, after US inflation for September came in slightly lower than expected.
Year-on-year inflation in the US was recorded at 2.2% in September, just below a Trading Economics consensus forecast of 2.3%.
The consumer price index, measuring what Americans pay for everything from groceries to theatre tickets, advanced 0.5% in September from a month earlier, the Labor Department said on Friday.
It was the largest monthly gain since January, reported Dow Jones Newswires.
Prices for other items rose very modestly. Excluding volatile food and energy costs, so-called core prices, increased 0.1%, the newswire said.
The consensus was for a 0.6% increase from the previous month, and a 0.2% increase in core prices.
The rand was trading at about R13.36/$ shortly before the announcement was made, immediately firming to R13.30, and reaching an intraday best of R13.2868.
At 3pm it was at R13.3082 to the dollar from R13.4498, at R15.7818 to the euro from R15.9176 and at R17.7078 to the pound from R17.8365.
The euro was at $1.858 from R1.1835.
Some analysts had expected a softer inflation reading, given the recent effects of hurricanes in the US.
There had also been repeated misses in forecasts in the past few months, said Rand Merchant Bank analyst John Cairns.
The stronger rand should help to keep local inflation in check, increasing the prospect of rate cuts in SA.
The local currency has been steadily recovering against the dollar, which has hit a soft patch amid uncertainty over whether the US Federal Reserve would stick to its interest rate-hiking cycle in 2018.
Fed minutes from September showed some officials were still concerned about the medium-term outlook for inflation, which has consistently run below the 2% target.
Analysts had said previously this meant the Fed would likely still raise interest rates in December, but that a lack of inflation may derail some of the rate increases pencilled in for next year.