South African Rand Drops Against Dollar, Heads for Week Decline

By Carli Lourens

Aug. 15 (Bloomberg) -- South Africa's rand was poised for a second-weekly decline against the dollar after the central bank kept interest rates at a five-year high.

The South African Reserve Bank left its benchmark rate at 12 percent yesterday and Governor Tito Mboweni said inflation will drop ``significantly'' in the first quarter of 2009. The rate decision followed six increases since June last year and matched the median forecast of 26 economists surveyed by Bloomberg News.

The rand fell as much as 0.6 percent to 7.8875 per dollar, extending its decline since Aug. 8 to 1.8 percent, and was at 7.8765 by 7:53 a.m. in Johannesburg, from 7.8445 yesterday.

Inflation in the continent's biggest economy has exceeded the bank's 6 percent ceiling for 15 months. Consumer price growth, which quickened to an annual 11.6 percent in June, will peak at about 13 percent in the third quarter before slowing to an average 7.2 percent rate in 2009, Mboweni said. The average rate of price growth is expected to slow to 5.9 percent in 2010.

The rand had its biggest weekly drop versus the dollar in more than two years last week as weaker precious metals prices hurt the outlook for export revenue. It has slid more than 12 percent in 2008, making it the worst-performing major currency monitored by Bloomberg.

To contact the reporters on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net