Rand rallies on dollar selling

The rand rallied more than 1% on Monday in a broad emerging market advance spurred by a sliding dollar as increasing US coronavirus infections stalled demand for the reserve currency.

At 1620 GMT, the rand traded at R16.42 per dollar, 1.38% firmer than its close on Friday.

The dollar crumbled on Monday as cracks in the US economic recovery drove investors away from the world’s reserve currency as they increased bets the Federal Reserve could flag another accommodative shift in its outlook this week.

“The rand is once again targeting the R16.50/$ resistance level, aided by USD weakness as the gold price climbs on the scale of US QE and the global yield seeking trend continues to fuel strength in the domestic currency,” said chief economist at Investec Annabel Bishop.

The United States central bank, the Federal Reserve, meets on Tuesday and Wednesday. It could confirm recent hints about the benefits of an average inflation target, which would allow rates to stay lower for longer and benefit high-yielding assets.

The rand had suffered a selloff after the local central bank cut rates on Thursday while leaving the door open for further cuts.

By Friday it had had slumped to a one-week low of R16.80, but is seen by analysts strengthening this week as investor focus switches back to offshore events despite some key local data releases this week including consumer inflation and trade figures.

The Johannesburg Stock Exchange (JSE) reflected the upbeat mood and backing of higher gold prices with the FTSE/JSE All Share Index up 1.22% to end at 56,326 points while the FTSE/JSE Top 40 Companies Index ended up 1.28% to 51,914 points.

Government bonds also firmed, with the yield on the benchmark instrument due in 2030 was down 9.5 basis points to 9.155%.