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Rand gains on yield hunt, US stimulus hopes

Continues to benefit from external factors.
Image: Waldo Swiegers/Bloomberg

South Africa’s rand firmed on Tuesday, building on recent gains as investor demand for high-yielding, riskier assets was spurred by signs the United States would conclude a new stimulus package.

At 16:00 GMT, the rand was 0.27% firmer at R16.47 per dollar compared with an opening level of R16.53. Trade was subdued, reflecting the overall caution in markets ahead of US elections in November and concerns about a resurgence of Covid-19 infections, especially in Europe.

The US stimulus programme, which will add to the $3 trillion in coronavirus relief already approved this year, has been key to market sentiment. Democrats and Republicans were said to be close to agreeing a deal on Tuesday.

Mini budget

With no top-tier data due locally this week, and the medium-term budget set for next Wednesday, the rand continued to be driven by global risk sentiment and investors’ search for high yields.

South Africa’s currency and bonds offer some of the highest returns among emerging markets, and have remained attractive despite mounting fiscal risks, with the economy in a four-quarter recession.

“The South African currency continued to benefit from external factors, with attractive carry underpinning rand strength despite a brittle economic backdrop. Global risk appetite supported the local unit,” said analysts at NKC African Economics.

In fixed income, the yield on the benchmark government bond due in 2030 was flat at 9.3%.

Stocks rose slightly on hopes for the US stimulus package.

The benchmark Top 40 index rose 0.22% to 50 852 points and the All-Share index closed 0.2% higher at 55 272 points.

Shares in Pick n Pay rose 2.17% to R52.66 after the supermarket chain declared a full-year dividend alongside an interim dividend.

Among the decliners, the gold sector fell 2.03%, with Harmony Gold 1.97% weaker at R92.10 and AngloGold Ashanti closing down 3.16% at R429.25.

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