Rand firmer as Fed cut bets slow virus-linked selloff

The rand edged firmer on Monday in a pause of the global selloff linked to deepening fears over the impact of the coronavirus, with some profit-taking and re-positioning ahead of a batch of key economic data locally.

At 0645 GMT the rand was 0.2% firmer at 15.60 per dollar, eking out gains in light liquidity Asian trading session, remaining at its worst level in four years as the rapid spread of the coronavirus compounded fears of credit rating downgrades.

Analysts said increasing bets of an interest rate cut by the US Federal Reserve this month was driving some flows back into emerging market assets as investors looked for yield and, in the rand specially, prepared for further bouts of volatility.

Monday’s session sees the release of local manufacturing activity data and new car sales data, followed by fourth quarter gross domestic product figures on Tuesday and business confidence numbers at the end of the week.

“The modest improvement in global risk appetite as we head into the new week is supporting the rand at the margin … The market is ripe for a correction and the improvement in risk appetite may well prove to be the catalyst for profit-taking from stubborn long USD positions,” traders at ETM Analytics said.

The rand has tanked 13% since the beginning of 2020 and 4% since Wednesday’s budget speech were treasury announced higher budget deficits and debt, as well as plans to slash public sector wages, raising the likelihood of a credit downgrade by Moody’s.

Bonds rallied, with the yield on the government issue due in 2030 down 9.5 basis points to 9.01%.