Rand firms on COVID-19 vaccine hopes

The rand extended a rally from the previous session on Tuesday, spurred by optimism about prospects for a COVID-19 vaccine and the re-opening of economies around the world.

The country’s stock market was also buoyant on the back of expectations for the vaccine which would ultimately enable economic activity to return to normal.

At 1530 GMT the rand was 0.50% firmer at R18.24 per dollar, holding at a four-session high reached on Monday in a strong day for emerging currencies after encouraging results from the trial of a vaccine for COVID-19.

“Growing optimism around a COVID-19 vaccine that is showing promising results helped to restore some positive market sentiment, while the Federal Reserve’s unwavering support for the US economy was also perceived as risk-on by the market,” said Bianca Botes of Peregrine Treasury Solutions.

“The rand continues to be driven by sentiment, which is essentially a balancing act as it switches between risk-on and risk-off as the pandemic unfolds,” Botes said in a note.

US biotech company Moderna Inc’s experimental COVID-19 vaccine, the first to be tested in the United States, produced protective antibodies in a small group of healthy volunteers, according to very early data.

Most emerging market and commodity-led currencies have been boosted by the vaccine hopes and a revival of some economic activity, although South Africa has been an underperformer among its peers.

The Johannesburg Stock Exchange shared the upbeat mood of the currency markets and showed modest gains in an extension of Monday’s rally.

The benchmark FTSE/JSE all share index rose 1.11% to close at 51,950 points, while the top 40 companies’ index climbed 1.02% to end the day at 48,161 points.

Bonds extended their rally, with the yield on the government issue due in 2030 down 38.5 basis points at 9.210% after falling 46.5 bps in the previous session.