Rand edges higher on stimulus hopes

The rand firmed early on Tuesday, recovering from a slip in the previous session as optimism about the passing of a stimulus programme in the United States boosted risk demand.

At 0645 GMT the rand was 0.34% firmer at R14.83 per dollar against an overnight close of R14.88 in New York.

US President Joe Biden’s administration is pushing hard to conclude a $1.9 trillion stimulus package.

Analysts see the massive fiscal spending, coupled with continued ultra-easy Federal Reserve monetary policy, dragging down the dollar in the longer term, feeding demand for risk assets.

“The rand was supported by US stimulus optimism while better-than-expected fiscal revenue performance ahead of the February budget speech boosted sentiment,” said analysts at NKC African Economics in a note.

“We continue to expect that a favourable external backdrop, shaped by a policy-led correction in the dollar, will support the risk-sensitive rand.”

The rand has also been supported by better than expected revenue collection, rising commodity prices and a trade surplus led by exports.

With no major data due on Tuesday trade is expected to be choppy, with markets also eyeing the local rollout of Covid-19 vaccines.

Bonds edged firmer, with the yield on the benchmark 2030 issue down 2 basis points to 8.49%.