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%.
The rout in emerging markets has continued today, with the South African rand (EZA) sliding 1.6% to 10.35 to the dollar, the yield on 10-year government bonds jumping 27.5 bps to 8.17%, and the JSE Top 40 sinking 1.8%. Meanwhile, Thai shares lost 4.5%, Indonesia 3.9% and the Philippines 4.6%. (See rupee hits record lows)
Emerging-market currencies are taking a battering, with the South African rand (EZA) receiving particular punishment. What began as a "drip drip of currency weakness" (WSJ) on concerns about the end of the Fed's QE program has turned into a flood as countries' various problems become exposed. The rand is down 6.3% since last week and the Turkish lira is -2.4%.
Gold's sharp rise today can be attributed to the dollar's drop vs. the yen; when the dollar drops, gold should rise, as their correlation during the past 24 days has hit -86%. A stock sector that's standing out is emerging market gold miners: South Africa’s Sibanye (SBGL), Harmony (HMY) and AngloGold (AU), plus Peru's Buenaventura (BVN) are stronger, even as their corresponding country ETFs (EZA; EPU) are in the red.
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