JOHANNESBURG: The South African rand retreated on Friday following strong recent gains, but analysts said the outlook for the currency remained positive.
The rand traded at 17.94 against the dollar at 1340 GMT, about 0.7% weaker than Thursday’s closing level.
The currency was hurt by dollar strength, as well as investor uncertainty over U.S. President Donald Trump’s tariff war.
“Local factors remain positive for the rand, but concerns over the U.S. fiscal debt, tariff uncertainty, and trade war fears are likely to see some consolidation between 17.70 and 18.00 (to the dollar) in the short term,” Andre Cilliers, currency strategist at TreasuryONE, said in a research note.
The rand advanced on Thursday, buttressed by the central bank stressing its strong preference for a lower inflation target at a monetary policy announcement.
The South African Reserve Bank (SARB) presented detailed modelling of the impact of a 3% inflation target, compared to the 4.5% level it aims for at the midpoint of its current 3% to 6% target range.
The SARB, which resumed interest rate cuts on Thursday after a pause in March, added that its Monetary Policy Committee felt a 3% target was “more attractive” and said it would continue to consider scenarios based on that target at future rate meetings.
“Investors focused on the implications of a lower target, namely lower inflation, reduced interest rates, bond market inflows, and stronger long-term growth, which further support the rand,” ETM Analytics said.
On the Johannesburg Stock Exchange, the Top-40 index last traded down 0.7%. The benchmark 2035 government bond was marginally stronger, as the yield fell 1.5 basis points to 10.155%.
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