Rand extends gains, tracking dollar and Fed signals

THE rand extended its recent gains early on Wednesday, continuing to track the dollar and signals about when the US Federal Reserve might begin paring back its massive pandemic-era stimulus.

At 0714 GMT, the rand traded at R14.4500 to the dollar, 0.6% firmer than its previous close, as the dollar traded near its lowest point in nearly three weeks.

The rand has notched up gains of more than 3% against the greenback since Friday, when Fed chairperson Jerome Powell gave a dovish speech that suggested the US central bank was in no rush to raise interest rates.

Along with other risk-sensitive currencies, the rand has been supported by the Fed’s ultra-loose policy. It moves regularly on shifts in expectations about when the Fed could start rolling back asset purchases or lifting rates.

“The currency continues to take direction from global developments, and where the US Fed goes, the rand is sure to follow. We continue to expect a little volatility as the tapering of bond purchases becomes real,” Anchor Capital said in a note.

Globally, the focus for currency traders was on a key US jobs report on Friday, while domestically, investors will scrutinise purchasing managers’ index surveys and vehicle sales data this week for clues about the pace of an economic recovery from the pandemic.

So far the recovery has been uneven and halting, with riots in July linked to the jailing of former president Jacob Zuma detracting from a strong first-quarter performance. Second-quarter gross domestic product figures are due next week.

The JSE’s Top 40 Index was down 0.2% in early trade. Government bonds were also a touch weaker, with the yield on the 2030 instrument rising 2 basis points to 8.795%.