Rand set for weekly gains

The rand fell on Friday, but it looked set for weekly gains as riskier currencies broadly received a boost from the U.S. Federal Reserve maintaining its dovish stance.

At 1500 GMT, the rand traded at 14.75 versus the dollar, 0.14% weaker than its previous close.

The currency was up nearly 1% since Monday.

The South African currency has tracked swings on global markets this week, rallying when the US Federal Reserve pushed back against speculation over rate hikes before retreating.

Some investors see the rand as a proxy for emerging-market risk, which means it can be highly volatile.

Market focus is now on the South African Reserve Bank (Sarb) monetary policy committee meeting next week.

A Reuters poll found on Thursday that the SARB will keep its repo rate at a record low of 3.5% at its March 25 meeting and at that same level until early 2022.

“The window for additional interest rate cuts in South Africa has closed, with the next move in rates likely to be up,” said Jeffrey Schultz at BNP Paribas.

“That said, we do see renewed pressure of the Sarb to act earlier than we had previously expected. Some of South Africa’s EM peers are already responding to a gradual grind-up in core rates this year and starting policy tightening earlier.”

Stocks were down on Friday, closing the week with a net drop as concerns of power cuts locally overlapped with fears of rising treasury yield in the US.

The benchmark all-share index fell by 1.24% to end the week at 65,911 points, its lowest point in three weeks. The bluechip index FTSE/JSE top 40 lost 1.21% to end at 60,313 points.

The fall was led by the country’s banks, which are sensitive to local economic factors, and mining companies which depend on reliable power supply for smooth operations.

“The ongoing load-shedding is quite a big concern,” said Greg Davies, analyst with Cratos Capital. He said a lot of investors are also trading with an eye on rising U.S. Treasury yields which could hit the stocks in the long run.

Usually when benchmark yields rise, the cost of capital for companies rises, hurting the market valuation of these firms.

Government bonds gained as the yield on the 2030 bond fell 10 basis points to 9.335%.