Rand poised for its biggest monthly gain since January

The rand was little changed in mid-morning trade on Tuesday, but was poised for its biggest monthly gain against the dollar since January, outpacing some of its emerging-market peers in the process.

The stronger rand will help alleviate concerns about inflation, which has been creeping up since hitting a seven-year low in March.

The rand has benefited from the relative calm in global markets following a turbulent second quarter, which saw big bond inflows as sentiment towards emerging markets soured. Since then, foreigners — who hold a big chunk of local bonds of about 40% — have steadily come back to the local market, enticed by the higher real yields government bonds offer.

Local pension funds have also taken advantage of the higher yields, caused by earlier fears of high interest rates in the US and generalised global risk-off environment.

The value of the rand gained 4% against the dollar in July, beating the Turkish lira, which lost 7% against the greenback in the same period. The Mexican peso was, however, a clear winner in the developing world as it gained 7% against the dollar.

Local dynamics have also had a positive spin on the rand, after struggling power utility Eskom secured a $2.5bn loan from the China Development Bank, in a move that will relieve pressure on its finances.

At 11.45am, the rand was at R13.1384, from R13.1557 to the dollar, at R15.4060 to the euro from R15.3995, and at R17.2795 to the pound from R17.2804.

The yield on the benchmark R186 held steady at 8.58%, but also dropped fairly sharply in July.