THE rand was stronger against the dollar on Tuesday afternoon following the release of January’s producer inflation figures.
Earlier in the day, the rand fell briefly against major currencies following news that two shafts at Lonmin’s Marikana operations were shut after workers failed to report for duty.
"There was a scare at midday because of news of a new strike at Marikana but that hasn’t had any lasting effect," said John Cairns, head of financial markets research at Rand Merchant Bank.
The rand fell to an intraday low of R9.1160/$ after the Lonmin report.
The January producer price index (PPI) — the first index using the revised format and weightings — for final manufactured goods came in at 5.8% but the figure had little effect on the domestic currency.
"The rand should be able to see some moderate strength in the first part of the year, as instability fears that were prominent last year start to diminish, but we don’t see scope for the currency to strengthen significantly," said Mr Cairns. "If anything, the rand will tend towards undervaluation this year and over the next few years because of the current account," he said.
At 3.38pm, the rand was bid at R9.0417 to the US dollar from R9.0742 at Monday’s close.
The local currency was bid at R11.7890 to the euro from its previous close of R11.8270 and at R13.7085 against sterling from R13.7181 before.
The euro was bid at $1.3041 from $1.3034 at Monday’s close.
Mr Cairns quashed rumours the South African Reserve Bank was considering a rate cut, saying it was "very unlikely". "Despite the reduced tariffs agreed on by Nersa (the National Energy Regulator of South Africa), there will still be pressure on inflation," said Mr Cairns.
"The Reserve Bank will be cautious about cutting rates in an environment where inflation is set to edge above the upper limits of the target band," he concluded.
