Hedge funds crank up bets on the rand in record show of support

Currency speculators are placing their bets on the South African rand at a record pace, even as Russia’s assault on Ukraine sends investors fleeing from most riskier assets.

Hedge funds turned net long on the rand to the tune of R13,40 contracts as of March 15, swinging from a net short position of 239 contracts the previous week. The change was the biggest since the Commodity Futures Trading Commission began collecting the data in 2015. Net positions are now at their highest since 2017.

“The rand has been remarkably resilient despite uncertainties caused by Russia’s war on Ukraine and the hawkish policy path set by the US Federal Reserve,” said Nicky Weimar, chief economist at Nedbank Ltd., in a note to clients.

The rand has advanced 7.7% this year, one of only six developing-nation currencies out of 24 tracked by Bloomberg to have strengthened against the dollar.

Weimar said the strong performance reflected support from higher gold and other metals prices, and renewed foreign interest in the local equity market.

“Apart from exposure to commodities, South Africa offers deep financial markets, cheap valuations, sound monetary policy, and at least somewhat improved fiscal metrics when compared with other large emerging market economies such as Russia, Turkey, and even Brazil and other Latin American countries,” she said.

The rand strengthened 0.7% to R14.80 per dollar as of 3:50 p.m. in Johannesburg, its best level of 2022.