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Rand, stocks boosted by global risk demand

Optimism drives risk buying, although South Africa’s specific growth challenges temper inflows.
Image: Shutterstock

South Africa’s rand rallied more than one percent on Tuesday, recouping most of the previous session as hopes of a coronavirus vaccine and signs of economic recovery around the world kept investors interested in risk assets.

Stocks also rose, tracking global equity indices.

At 17:30 the rand was 1.52% firmer at R15.24 per dollar, having dipped to a three-session low of R15.47 overnight in erratic trading.

The rand’s gains matched advances by fellow high-yield, emerging market currencies, with the Brazilian real and the Mexican peso both posting 1% gains.

“Yesterday it appeared to be a global case of profit taking and month-end fixes with commodities struggling, equities lower and the dollar stronger,” Standard Bank’s Warrick Butler said in a note to clients.

Along with optimism about a vaccine, expectations of more monetary stimulus from the United States and signs of a solid rebound in China have driven risk buying, although South Africa’s specific growth challenges have tempered inflows.

Public sector wages

On Tuesday, the government asked for a court hearing over a wage dispute with public sector trade unions to be postponed to 2021. Unions took the government to court after officials said the state could not afford to pay salary increases that were due to come into force in April 2020.

Economists view the dispute as critical as the wage cuts are a centrepiece of government’s plan to stabilise soaring debt levels.

The Absa Purchasing Managers’ Index (PMI) also showed a slower local economic recovery, with new sales dropping in November.

“The pair may well consolidate in its recent trading range of 15.10-15.50,” economists at ETM Analytics said. “A break of 15.00 still very much on the cards as more Fed stimulus and material progress in the development of a Covid-19 vaccine looks likely.”

The Johannesburg Stock Exchange All-Share index firmed 0.73% to 57 510 points, while the Top 40 index closed up 0.74% to 52 764 points.

Gold shares gained 7%, with Gold Fields up 6.68% to R140.33 and Harmony Gold 6.53% firmer to R67.40.

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Nothing drives the value of the Rand more than US debt and printing more dollars. US looking at increasing debt by 4 trillion dollars? SA had 2 downgrades further into junk status, and the Rand strengthens?

The US prints Trillions of Dollars, has the biggest debt in the world
($27 Trillion and counting).

Moodys, Fitch, S & P are all based in the US.

What a monopoly!

Will the US ever get downgraded?

Never

End of comments.

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