(Updates rand to reflect afternoon trade, adds stocks)
JOHANNESBURG, Oct 12 (Reuters) – The South African rand gained against the dollar on Tuesday, as analysts said markets were pricing in an interest rate increase by the central bank in November.
At 1608 GMT the rand traded at 14.9500 against the dollar, around 0.83% stronger than its previous close.
The South African Reserve Bank (SARB) has kept rates on hold at its previous seven monetary policy meetings, but at its Monetary Policy Review last week it highlighted inflation risks.
In addition to fully pricing in a 25 basis point rate rise on Nov. 18, markets have priced in significant rate hikes next year, said ETM Analytics co-head of financial markets Kieran Siney. “This adds positive momentum,” he told Reuters.
Deutsche Bank analysts made a similar point this week, arguing that upside surprises to global inflation and more hawkish emerging market central banks had put South Africa on the list as the next country to deliver an aggressive hiking cycle. But they argued in a research note that market pricing was excessive.
Earlier on Tuesday, data showed August manufacturing output rose 1.8% year on year while mining production grew 2.0% in annual terms the same month. Manufacturing surprised to the upside while mining came in weaker than expected, reinforcing the view that the economic recovery from the COVID-19 pandemic has been uneven across sectors.
Stocks ignored local data, taking their cue from global markets as stagflation risks hit some stock markets.
The Johannesburg All-Share index weakened 0.17% while the Top-40 index fell 0.27%.
“Inflation fears and the growing energy crisis are weighing heavily on investor sentiment,” Andre Cilliers, Currency Strategist at TreasuryONE said. (Reporting by Alexander Winning and Nqobile Dludla; Editing by Giles Elgood)