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Weaker…

12 August 2004 Angelo Coppola

(13.8.04) The rand was sharply weaker against major currencies in late afternoon trade yesterday after South African Reserve Bank governor Tito Mboweni announced a surprise 50 basis point cut in the repo rate to 7,5%.

Economists had unanimously expected the Bank's Monetary Policy Committee to leave rates unchanged. RMB AM and Business Day reports.

At 4pm, the rand was quoted at R6,4426 to the dollar from R6,2175 just before Mboweni delivered the committee's statement and an overnight close of R6,2151.

It was quoted at R7,6434 to the euro from a previous R7,5857 and at R11,4900 against sterling from Wednesday's R11,3690.

The weakness is all on the (committee's decision) a market analyst said. he described the decision as a "hell of a surprise". The cut severely dents the carry trade, particularly in light of expected further increases in the interest rates in the US, the analyst explained.

The dollar reversed some of its earlier losses against the euro yesterday after a report on US retail sales helped shore up the Federal Reserve's upbeat outlook on the economy.

June sales were revised to a fall of 0,5%, less than the previously reported decline of 1,1%.

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