Rand firmer, mood cautious

The rand firmed on Wednesday as the dollar fell, although a resurgence of new coronavirus cases globally and fresh evidence of the weakness of the local economy kept sentiment cautious.

At 1500 GMT the rand was 0.97% firmer at R17.01 per dollar.

With COVID-19 cases rising sharply in the United States, as well as in developing economies, such as India, Brazil and South Africa, investors were wary.

Domestically on Tuesday, a survey showed consumer confidence plunged to a 35-year low in the second quarter, while ratings firm Fitch warned about the country’s ability to execute plans to slash spending, also hurting the rand.

“South Africa’s economic fragilities have rendered the ZAR vulnerable to external shocks, meaning the currency will remain at the mercy of broader sentiment dynamics,” said market economists at ETM Analytics in a note.

However, local sentiment and higher gold prices have bolstered the Johannesburg Stock Exchange (JSE). While the benchmark FTSE/JSE All share index closed down 1.17% at 55,889 points, the FTSE/JSE Top 40 Companies’ Index rose 1.25% to 51,559 points on Wednesday.

The JSE’s gold index, representing top five gold miners, was up 3.49%, strengthened by a robust gold market, which is seen by investors as a safe haven store of value.

Banks also led gains, with the banking index up 4.21%.

In fixed income, the yield on the benchmark government issue due in 2030 was down 0.5 basis point to 9.685%.