Rand firmer with carry plays back on; stocks slip

The rand extended gains on Friday despite the dollar regaining its footing, as investors picked the currency over other emerging markets to take advantage of the carry trade on offer.

Stocks fell, suppressed by a slide in commodity prices.

At 15:30 GMT the rand was 0.28% firmer at 13.2600 per dollar, having opened the week at 13.4650, a gain of more than 1.5%, and well below the crucial 13.50 technical level.

“When looking at month-to-date performance of the rand against G10 countries, rand bulls will find it encouraging to note that an across the board outperformance has been posted,” analysts at Investec said in a note.

The rand, along with the currencies of emerging markets such as Brazil, India, Mexico, Indonesia, and Turkey, is often used as a carry target, with investors borrowing money at a low interest rate and investing it in a high-yielding currency to earn the better interest rate.

With the South African Reserve Bank set to keep lending rates steady at 6.5% at Thursday’s policy meeting, and inflation sliding to the bank’s favoured midpoint, the rand offers an attractive carry trade compared to the likes of Turkey, where political turmoil and soaring inflation have spooked speculators.

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All 25 economists surveyed by Reuters in the past week said the Reserve Bank would keep rates unchanged.

Bonds were slightly weaker, with yield on the benchmark yield due in 2026 up 1 basis point at 8.735%.

Shares fell for a fourth straight session, with gold prices sliding to seven-month lows as demand was subdued, easing risk sentiment and expectations of higher US interest rates.

The benchmark Top-40 index closed 0.85% lower to 50,244 points while the broader All-Share index shed 0.85% to 56,364 points.

Gold prices are down about 9% since mid-April, and on the day spot gold was down 0.36%.

Shares in gold producer Harmony Gold fell 4.16% to R21.20, while Gold Fields closed 2.05% lower.

Platinum miners were also among the biggest decliners, with the spot price losing 1.76%.

Anglo American Platinum closed 4% lower to R355.64, followed by Impala Platinum which fell 8.53% to R19.17.