The South African rand edged higher on Thursday as some demand for risk currencies returned to global markets and investors cashed in some of their dollar rally profits.
At 1500 GMT the rand was 0.3% firmer at R18.97 to the dollar in another volatile session a swings from a session-best R18.88 to more than R19 rand before bids in New York trading helped it to firm again.
The greenback slipped on the day as a rise in crude oil prices and renewed concern over the coronavirus impact on the world’s No.1 economy cooled inflows to the safe-haven currency.
On the domestic front, stretched liquidity stoked volatility as investors awaited President Cyril Ramaphosa’s late night address on an expected phased easing of a national lockdown now in its fourth week.
Finance Minister Tito Mboweni is also set to announce an emergency budget in the coming days to give life to Ramaphosa’s R500 billion ($26 billion) stimulus plan.
Initial cheer gave way to some worries about how the plan would be funded, with South Africa’s credit rating already at sub-investment level, debt climbing fast and the economy set for a deep recession.
“Selling dollars at these levels is likely to be favoured, but perspective is needed on the scale of the task that SA faces as a country and the limits of the country’s resources and policy response,” said economists at ETM Analytics.
“While the USD/ZAR is due a correction lower, a full-blown retreat back below R18.00 seems a way off.”
Bonds weakened, reflecting the funding risk of the fiscal stimulus. The yield on the 2030 government issue rose 18 basis points to 10.850%.
Equities, meanwhile, benefited from optimism over the economic relief package announced by the President on Tuesday and a set of encouraging results from mining companies with operations in South Africa.
The FTSE/JSE top 40 index rose 3.2% to close at 1413.14 while the all-share index was up 3.1% at 1493.33.
The resources index, which comprises 10 leading South African miners, was up 6.2% by the close. This was largely led by bullion miner Gold Fields, platinum producer Sibanye Stillwater and petrochemicals major Sasol .