Rand firms as global risk sentiment improves

South Africa’s rand strengthened on Wednesday, supported by improved risk sentiment in global markets following hawkish comments from the US Federal Reserve, while investors awaited domestic consumer price inflation data.

At 0635 GMT, the rand was around 0.3% stronger R14.80 to the dollar, hovering close to five-month highs scaled in the previous session on expectations that the central bank will raise interest rates on Thursday.

“Markets turned more positive on riskier assets yesterday, and high commodity prices drove developments. The rand and other commodity driven currencies relished the opportunity to make further gains,” said Bianca Botes, director at Citadel Global.

Lifting appetite across markets, Fed Chair Jerome Powell said the US central bank could move “more aggressively” to raise rates to fight inflation, possibly hiking by more than 25 basis points at one or more meetings this year.

Statistics South Africa will publish February consumer price inflation numbers at 0800 GMT, which are expected to show CPI quickened to 5.8% year-on-year.

On Thursday, the South African Reserve Bank is expected to hike its repo rate to 4.25% to try to tackle inflation, according to a Reuters poll of economists.

In fixed income, the yield on the benchmark 2030 government bond was up 3 basis points to 9.815%.