Rand firmer as global risk appetite continues

The rand firmed early on Monday alongside other emerging market currencies as more countries eased coronavirus lockdown restrictions, boosting investor appetite for riskier assets.

At 0730 GMT the rand was 0.25% firmer at R18.28 per dollar versus a close of R18.33 on Friday.

European countries such as Spain and France, which have been hit hard by the virus, have announced a phased easing of lockdown measures as death tolls decline. Some Asia-Pacific nations, which have a relatively smaller number of cases than European countries, are taking similar steps as well.

Risk appetite has picked up since the United States reported fewer job losses than expected on Friday, with the rand clawing back ground as investors seek value in risk assets that have hit oversold territory.

“The risk-on sentiment from Friday continues this morning as economies restarting outweigh poor economic data and the first hint of a second wave of Coronavirus cases,” said senior dealer at TreasuryONE Andre Botha in a note.

“We need to break below R18.25 to see a possible move towards R18.00 and then R17.75,” he added.

With no major data releases locally or abroad the rand is seen trading in a narrow range for most of the day, while the reaction to treasury’s decision to up the amount on sale at its weekly auctions is set to be reflected in bond trading.

South Africa will increase the amount of debt on sale at its weekly auctions by nearly R2 billion ($109 million) to cover a budget deficit set to increase sharply due to the coronavirus stimulus package announced by President Cyril Ramaphosa in April.

In early trade yields were lower on long term government issues, with the paper due in 2030 down 4 basis points to 9.25%, back to levels last seen in early March before the pandemic struck.