Inflation rate in South Africa dips, country’s currency falls amid US-China trade impasse

South Africa witnesses the falling of annual inflation for the first time in three months with the rate depressing below the midpoint of the central bank's target range.

On Wednesday, May 22, South Africa's rand weakened on Wednesday as steady demand for dollars spurred by easing of trade tensions between Washington and Beijing kept the local currency on the backfoot. At 0640 GMT the rand was 0.28 percent weaker at 14.4125 per dollar following a close of 14.4 overnight in New York.

The currency has traded within the 14.40 to 14.45 band for most of the week with a dearth of domestic economic and political drivers exposing it offshore factors dominated by the US-China trade standoff, Reuters reported.

On Tuesday, May 21, the US eased trade restrictions on Chinese telecommunications equipment maker Huawei after last week blocking the company from buying US goods. That supported the dollar, lifting it to near 3-1/2-week high, while emerging market currencies dipped in response.

Statistics South Africa publishes April inflation figures at 0800 GMT, with the rate expected to remain at 4.5 percent year-on-year, well within the central bank's target range of between 3 percent and 6 percent.

A Reuters poll of economists and analysts that was conducted last week forecast the central bank will leave interest rates unchanged at 6.75 percent, resisting pressure to lower lending to support flagging economic growth.

Bonds inched firmer, with the yield on the benchmark issue due in 2026 down 1 basis point to 8.45 percent.

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