Picture: REUTERS
Picture: REUTERS

The rand dropped on Wednesday morning following the release of the December consumer price index figure for SA.

At 10.30am the rand was 0.4% softer at R13.9149/$, 0.4% down at R15.8721/£ and 0.4% lower at R18.10844/€. The euro was flat at $1.1361.

Data from Statistics SA showed that inflation eased to 4.5% in December, in line with market expectations, on the steep fuel price cuts that month.

In an earlier interview with Bloomberg TV in Davos, Reserve Bank governor Lesetja Kganyago said that if inflation were at the midpoint of the bank’s targeted range of 3-6%, this would allow flexibility to deal with shocks.

The rand, however, may still face headwinds as tension between the two biggest economies remains elevated .

“Overnight there have been rumours doing the rounds that the US-China trade talks have stalled and might have been cancelled, which places us back in the tariff war sphere,” TreasuryOne senior dealer Andre Botha said.

“We all know that the emerging market currencies did not enjoy how the trade war played out, and the latest news will only dent the emerging market sentiment more.”