Rand firms as dollar wobble lifts emerging currencies

The rand was 0.42% stronger at R16.70 against the dollar at 1530 GMT.
Image: Waldo Swiegers/Bloomberg

The rand firmed on Monday, helped by increased risk appetite as investors bet again on a global economic recovery.

The rand was 0.42% stronger at R16.70 against the dollar at 1530 GMT, its best level since June 11, having gained steadily since opening above the R17.00 mark last Monday.

The gains have been driven mainly by global sentiment rather than domestic factors, with investors searching for high yields on hopes for a quick economic recovery despite a global surge in COVID-19 infections.

“While the rand is likely to make further gains on global data showing a lessening in the weakness of Q2.2020’s economic performance, this does not mean there will be a steady recovery, and the domestic currency will remain volatile,” Investec chief economist Annabel Bishop said in a note.

Emerging market currencies rose in unison, taking advantage of a dollar weighed down by the United States’ battle to contain the spread of the coronavirus as well as some investor caution ahead of data releases due in the world’s biggest economy.

Traders, however, expect the rand to face some selling pressure later in the week, with power utility Eskom announcing that nationwide controlled blackouts would continue on Monday.

“The rand juggled cautious sentiment – as coronavirus infections are surging across the globe and frustration hit as South African power utility Eskom switched off the lights – against a soft US PPI (producer price index) release,” analysts at NKC African Economics said in a note.

The Johannesburg Stock Exchange (JSE) started the week with a big jump with the FTSE/JSE All Share Index closing up 1.41% to 56,199 points while the FTSE/JSE Top 40 Companies’ Index up 1.41% to end at 51,875 points.

Bonds also firmed, with the yield on the benchmark 2030 government issue down 4.5 basis points at 9.45%.

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