Johannesburg - South Africa's rand drifted back near one-week lows on Friday as inflationary pressures weighed, with rising consumer prices increasing the likelihood of a hike in lending rates.
At 06h40 GMT the rand had weakened 0.30 percent to 12.13 per dollar, erasing gains backed by local demand for the currency that had lifted the unit to a one-month high in the preceding session.
Producer inflation quickened to 3.6 percent in May, slightly faster than expectations, while consumer price forecasts signalled a breach of the South African Reserve Bank's target by 2016, underscoring the case for a rate hike at the bank's next policy meeting in July.
Worries over the ongoing Greek debt crisis and firm data from the United States, stoking bets of a rate hike there as early as September, added some pressure on the local currency as it struggled to hold trades through the 12.10 technical resistance mark.
“US data over the past two weeks has been stronger than expected and fears of a September rate hike are growing again,” said John Cairns, a currency trader with RMB. “Local economic data all suggests a higher inflation outlook.”
South Africa's energy department announces new fuel prices for July later in the session, expected to show higher pump prices and which would feed into upside inflation risks.
Yields on government bonds ticked up, with the benchmark issue due in 2026 adding 1.5 basis points to 8.24 percent.
Reuters