The South African rand eased from a new multi-week high against the US dollar in early New York trading on Tuesday after the South African Reserve Bank decided to trim its repurchase rate by 100 basis points to 9.5% per annum. The rand that rose to near an 11-week high of 9.3605 in the Asian session reached as low as 9.4928 by 9:25 am. Currently, the dollar-rand pair is quoted at 9.4303.
This is the second reduction in two months and will be effective from March 25. In an accompanying statement, the central bank said that the South African economy has not escaped from the impacts of the developments in the global financial markets and domestic production has contracted as a result of weak domestic demand and a significant decline in export demand.
Additionally, the bank forecasts consumer price inflation to average 8.1% in the first quarter of 2009 and then to decline to below 6% in the third quarter of the year. In January, the inflation rate fell for a fifth consecutive month to 8.1%. Yet, it is above the target band of 3%-6%.
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