RAND POSTS WEEKLY GAINS

THE RAND fell on Friday, but recorded weekly gains after a rally the day before that took it to its best level in 15 months as falling yields in the US drove global demand for risk assets.

At 5pm, the rand was 1.06 percent weaker at R14.32 against the dollar. On Thursday, it broke through a number of technical levels on its way to R14.15, its strongest since January 2020. The currency was up on Friday 1.6 percent since Monday.

“The current EM-friendly (emerging markets-friendly) market environment with ample liquidity, in which economic optimism and risk-on sentiment prevail, offers the rand further appreciation potential,” Elisabeth Andreae, FX analyst at Commerzbank, wrote in a note.

“But the global environment and risk sentiment can change quickly, for example in the wake of recurring (US Federal Reserve) tapering expectations. In our view, this limits the ZAR appreciation potential as well as domestic risks.”

The dollar has been on the back foot this month as Treasury yields stabilize below one-year highs reached last month. Yields have fallen as the Fed reiterates its commitment to holding interest rates near zero for years to come, and on some concerns that a recent uptick in inflation will be temporary.

Lower US rate expectations boost investors’ appetite for EM assets such as the rand, which offer higher returns but carry more risk.

In the equities market, stocks joined a global rally, as upbeat US retail sales and manufacturing data as well as record first-quarter economic growth in China were offset by worries over rising coronavirus infections.

The JSE all share index ended the day 1.29 percent firmer at 68698.78 points, its highest level since March 12, while the Top40 index climbed 1.32 percent to 62 898.13 points, also posting its highest level since March 12.

Bonds firmed, with the yield on the benchmark 2030 government issue down 4.5 basis points to 9.06 percent. I Reuters