Market Responds Positively To Sarb’s Interest Rate Hike

The rand rallied more than 3% on Thursday strengthening to its highest level this week, following the SA Reserve Bank’s (Sarb) interest rate hike

The Sarb’s surprising raising of the repo rate to 7% also boosted JSE stocks particularly among the banks, after Governor Lesetja Kganyago made a point to reaffirm the Sarb’s independence, according to Reuters.

“It’s probably not a coincidence that Governor Kganyago stressed the Sarb’s independence. Slightly tighter monetary policy would do little to insulate the rand from another crash if President Zuma provides another political surprise,” Capital Economics Africa analyst John Ashbourne was quoted saying.

At one stage during the day, the rand rallied to R15,06 to the dollar, gaining from R15,75 ahead of the Sarb’s announcement.

Government bonds also showed impressive gains, as the yield on debt maturing in 2026 slid 31 basis points to close at 9,1% on the day.

Nedbank shares rose 4,25% on Thursday, while Standard Bank was up 4,07%.

“Banks are having a great day because the higher interest rates will certainly help their margins,” said Greg Katzenellenbogen, Sanlam Private Wealth director.

Trading volumes on the JSE almost doubled from last year’s daily average of 296 million shares traded to almost 570 million shares on Thursday.

The Sarb increased the repo rate by 25 basis points to 7%, while the prime lending rate rose to 10,5%.

source: Destinyman


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