Rand extends gains amid risk-on sentiment

The rand firmed in early trade on Friday, building on the previous session’s gains spurred by improved risk appetite among global investors hungry for yield.

At 0647 GMT, the rand was up 0.16% at R15.15 versus the US dollar, after Thursday’s 0.7% gain.

“Dollar weakness was a major theme this week amid positive developments on the vaccine front and renewed optimism around US stimulus talks. Naturally, emerging currencies wasted no time in exploiting the dollar’s steep decline,” said Lukman Otunuga, senior research analyst at FXTM.

But Otunuga noted that over the past five days, the rand has weakened against every single G10 currency, excluding the dollar and Japanese Yen, saying this meant appetite towards the local currency remained shaky ahead of third-quarter economic growth data on Tuesday.

“The question on the mind of many investors is whether South Africa will experience a sharp economic rebound in Q3… However, with retail sales muted and Covid-19 impacting consumer spending habits, there may be room for disappointment,” said Otunuga.

“On top of this, uncertainty around the public wage dispute and the rising threat of a second coronavirus wave fostered a sense of caution and unease.”

South Africa on Thursday tightened Covid-19 rules in the Eastern Cape province where infections are rising the most, curbing movement and gatherings, but decided against reinstating a nationwide lockdown.

Government bonds firmed in early deals, and the yield on the instrument due in 2030 was down 1.5 basis points to 9.020%.