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Rand recovers but still vulnerable

Government bonds were flat, with the yield on the benchmark 2026 instrument at 8.415%.

The rand started the week firmer against the dollar, recovering some ground on Monday after steep losses last week although a number of economic data releases in the coming days could knock it back off track.

The rand’s gains were mostly driven by global factors, including the United States’ decision to shelve plans to impose tariffs on Mexico and rising chances that the next US interest rate move will be a cut given lacklustre jobs data last week.

At 1500 GMT, the rand traded at R14.79 versus the dollar, around 1.17% stronger than its previous close. Global factors also boosted emerging market equities, to their highest point in nearly four weeks on Monday.

However, local factors could again pull the rand back again in the next few days.

After last week’s news that the South African economy contracted by over 3% in the first quarter, investors are now turning their attention to data releases on manufacturing, retail sales and business confidence to further gauge the economy’s health, Lukman Otunuga, research analyst at FXTM, said in a note.

“Should the pending reports fail to meet market expectations, the rand which is already tussling with domestic headwinds, may find itself exposed to downside risks,” the note said.

The rand slumped last week following news of the economic contraction and also amid a row over the central bank’s mandate, which rattled investors.

Government bonds were flat, with the yield on the benchmark 2026 instrument at 8.415%.

In stocks, the benchmark Johannesburg Stock Exchange Top 40 Index rose 0.73% to 52,357 points while the broader All-Share Index closed 0.66% higher at 58,481 points.

The biggest winners were retailers and financial firms, which also benefited from improved sentiment and the stronger rand. Retailer Woolworths led the blue-chip index higher, rising 4.76%, followed by peers like Spar Group and insurers Old Mutual and Discovery. 

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Nothing a bit of reserve bank intervention can not help sort out. Not sure for how long though.

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