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Rand rallies as bears buy cheap, stocks inch up

Stocks tick up but restrained by hedges, technical factors.

The rand firmed by more than one% against the dollar for a second consecutive session on Wednesday boosted by a lull in local politics and some importers stepping into buy the currency before the rally fades.

Stocks inched higher, led by hotel group Sun International and clothes retailer Truworths.

At 1550 GMT the rand firmed 1% to 13.5675 per dollar, a touch short of the session and week-and-a half best of 13.5100, with cooling hopes of tax reforms in the United States allowing the rand to remain on the frontfoot.

The rand has clawed back more than 2% in value against the greenback since tumbling to its worst level in six months on Friday. Analysts say the recovery was driven as much by the dollar’s decline as by short-covering by bearish investors and strong demand for bonds.

“Bonds had weakened considerably so yields were pretty attractive and that’s prompted foreign investors to buy back in at cheap levels. That has driven the rand’s recovery,” said strategist at ETM Analytics Halen Bothma.

“Underlying factors suggest the rand could test the downside. Not now but in the near-furture. If you’re an importer you don’t want to wait too long lock-in your forwards before they get overly expensive,” Bothma said.

Yields on government bonds ticked up to near the 9% mark that has lured investors seeking high returns. The yield on the benchmark 2026 issue added 3 basis points to 8.7%.

On the bourse, the main indices ended marginally higher, with the blue-chip index 0.15% higher at 51,362 points and the broader All-share index climbing 0.24% to 57,629 points.

Banking shares helped the blue-chip index higher, with Nedbank rising 2% to 212.90 rand.

Shares in packaging and paper company Mondi however fell, after the firm said its full-year results would be lower than analysts’ expectations due to cost pressures and adverse currency moves, dragging its shares down 7.44% to 346.89 rand.

On the All-Share, Sun was up 4.11% to 52.68 rand and Truthworths’ price rose 2.8% to 76.95 rand.

Gains have also been capped by technical factors, with momentum indicators tracked by analysts suggesting the indices have strayed into overbought territory. 

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