Rand strengthens as Evergrande deal lifts risk appetite

THE RAND strengthened on Wednesday as risk appetite improved after China’s Evergrande Group pledged it would make an upcoming bond coupon, offering relief to jittery markets that were on the edge on concerns of a potential debt crisis.

At 0640 GMT, the rand traded at 14.7500 against the dollar, 0.5 percent firmer than its previous close.

The currency had slipped to its weakest in more three weeks as risk appetite was dented on Tuesday after ratings agency Fitch said Africa’s most industrialised economy would continue to face challenges as it seeks to stabilise debt.

Evergrande said on Wednesday it would make a coupon payment on its domestic bonds on Thursday (September 23), allaying fears that a default of China’s No. 2 developer could ripple through the global financial system.

Investor focus has now shifted to local consumer inflation data due at 0800 GMT and on the US Federal Reserve, which is expected to drop more hints on interest rates and its future policy path.

Riskier currencies, such as the rand, thrive on US interest rates remaining low because they benefit from the interest rate differential that increases their appeal for so-called carry trade.

REUTERS