Rand perks up ahead of US second-quarter GDP

The rand was relatively stronger on Friday morning, continuing positive momentum that has been in play for the better part of the week.

The local currency has benefited from signs of easing global trade tension, with the US and the EU having agreed earlier in the week to explore talks to find a solution to the tariff dispute.

These developments helped boost global sentiment and, in turn, the rand, which was on track to snap a four-month losing run against the dollar. A stronger rand helps keep inflation in check, although it is a headwind for exporters.

Recent pledges by China and several other countries to invest in SA have added positive momentum to the currency, which climed to a six-week high to the dollar early on Thursday. On Tuesday, China pledged to invest $14.7bn in SA, but gave no details in this regard.

Eskom, which has long been considered a key risk to the broader economy, also secured a $2.5bn loan from China’s state bank, in a move set to relieve pressure on its finances.

A key piece of data that carries potential implications for the rand, is the release of US second-quarter GDP in the afternoon. Strong data could boost the dollar at the expense of the rand and other emerging-market currencies, as that would boost chances of higher interest rates in the US.

The world’s largest economy has been normalising its policy setting since 2015 by raising rates, which tend to detract from high rates offered by emerging markets.

Markets expect the US economy to have expanded at the 4.30% pace during the second quarter, from 2% in the first quarter.

At 8.49am, the rand was 0.42% stronger to the dollar at R13.1889 from R13.2452, at R15.3659 to the euro from R15.4168, and at R17.2925 to the pound from R17.3640.

South African bonds were relatively firmer, with the yield on the benchmark R186 fetching 8.585%, from 8.61% on Thursday.