South African rand strengthens as central bank hikes rates by 75 bps

JOHANNESBURG (Reuters) -The South African rand strengthened on Thursday after the central bank hiked its main lending rate by 75 basis points (bps) to 6.25%, in line with the forecast of the majority of economists polled by Reuters, to bring inflation back to target.

At 1635 GMT, the rand traded at 17.6300 against the dollar, 0.65% stronger than its previous close.

This was the sixth meeting in a row that the South African Reserve Bank's monetary policy committee (MPC) has raised its repurchase rate.

The South African Reserve Bank (SARB) has now hiked rates by a cumulative 275 bps since November last year in a bid to bring inflation back within its 3% to 6% target range.

Shaun Murison, senior market analyst at IG, said in a note that South Africa could expect at least one more rate hike in 2022.

"The size of the next hike will be data dependant, but perhaps a slightly less aggressive 50 basis points could be on the cards," Murison said.

Data on Wednesday showed August inflation eased to 7.6% year on year from 7.8% in July, still well above the bank's target although suggesting inflation may have passed its peak.

Stocks on the Johannesburg Stock Exchange (JSE) closed lower, mostly due to declines in the industrial index.

The benchmark all-share index closed 1.41% lower a.jtopt 65,276 points, while the Top-40 index fell 1.61% to 58,852 points.

The South African government's benchmark 2030 bond was stronger in afternoon trade, pushing the yield down 5.5 basis points to 10.535%.

(Reporting by Alexander Winning and Anait Miridzhanian; Additional reporting by Amruta Khandekar; Editing by Kim Coghill and Jonathan Oatis)