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South Africa joins in with emerging-market rate hikes

  • The South African Reserve Bank has unexpectedly raised interest rates by 50 bps, with the key repurchase rate rising to 5.5% and the prime lending rate to 9%.
  • The consensus was that the bank wouldn't increase rates, but the weakness of the rand has prompted it to act.
  • The bank's move follows similar action of varying degrees from peers in other emerging markets, most notably Turkey yesterday, India and Brazil.
  • "The bunch of rate hikes from other emerging-market economies has put pressure on (Governor Gill) Marcus to hike rates because there's a fear she's going to be left behind if she doesn't move and foreign money will then invest in other emerging market economies," says trader Sijadu Mzozoyana. (PR)
  • However, the bank's move seems to be having no effect on the rand, with the USD-ZAR +2.5 to 11.2988 rand. The FTSE/JSE Top 40 is +0.4%.
  • ETF: EZA
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