Rand hovers around 10-week highs

The rand swung between small gains and losses against the dollar on Thursday, remaining close to its best level in more than two months, reached on Wednesday, as sentiment improves on global stimulus measures.

In continued efforts by central banks and governments around the world to implement further measures to help cushion their economies from the coronavirus pandemic, the European Central Bank (ECB) earlier increased its pandemic emergency purchasing programme by €600bn, bringing the total to €1.35-trillion.

“The dollar has been weaker as market sentiment improves, safehaven demand wanes and risk appetite increases. This has benefited the rand along with other emergingmarket currencies,” said IG senior market analyst Shaun Murison.

The rand gained for a fourth successive day, firming to an intra-day best of R16.83/$, a level last seen on March 18.

At 6.24pm, it had firmed 0.06% to R16.8892/$. It was down 0.82% to R19.1539/€ and 0.25% to R21.3227/£. The euro added 0.66% to $1.1232. Despite gains of nearly 12% since the beginning of May, the rand is still down about 17% against the dollar in 2020.

“While the rand is trading at what many would deem a fairer value right now, it is still prone to shocks when volatility emerges, acting as a proxy for global financial market risk,” Murison said. While the R20/$ level appears far away for now, “it is still a possible longer-term target should fear re-emerge in the general marketplace”, he said.

The JSE, which also reached its strongest level since early March on Wednesday, gave back some of those gains after US President Donald Trump’s administration suspended passenger flights to the US by Chinese airlines and is reportedly set to designate more Chinese media outlets as foreign missions.

Meanwhile, Hong Kong has said it is prepared for sanctions following threats by the US after it enacted a new security law amid violent protest from its pro-democracy citizens.

“The tit-for-tat responses between the US and China are not easing up at all and eventually this will weigh much more on risk appetite,” said Oanda senior analyst Edward Moya.

The JSE all share fell 0.82% to 53,204.79 points and the top 40 0.94%. After surging to its biggest one-day gain in more than two decades on Wednesday, the banks index fell 1.1%. Financials were down 0.49% and resources 0.27%, while platinums gained 0.64% and gold miners 0.14%.