South African Rand Strengthens

South Africa’s rand strengthened on Monday, aided by the U.S. dollar being pinned near a one-month low and greater global risk appetite.

At 1500 GMT, the rand traded at 14.2500 versus the dollar, around 0.45% stronger than its previous close.

The dollar was dragged down by Treasury yields hovering near their lowest in five weeks after the U.S. Federal Reserve reiterated its view that any spike in inflation was likely to be temporary.

Meanwhile, greater risk sentiment, fuelled by expectations that monetary policy will remain accommodative the world over, sent Asian shares to a new high.

“As it is becoming clear that loan growth is not picking up in the U.S., the bond market is starting to question the reflation trade,” said currency analyst at Nedbank Neels Heyneke.

“One of the major reasons the ZAR is outperforming the other EMs is higher real rates. The other major driver is rising commodity prices driving a higher current account.”

Spot gold touched its highest in nearly two months earlier, while platinum and palladium were also up on the day.

South Africa recorded large current account and trade surpluses in the last two quarters of 2020 on higher demand for commodities as global trade conditions eased with the falling COVID-19 infections and a subsequent loosening of restrictions on economic activity.

Bonds dipped, as the yield on the benchmark 2030 instrument rose 3 basis point to 9.09%.

Stocks fell by almost a percentage on the opening day of the week as investors globally booked some gains, and were followed suit by traders in the local market.

The benchmark FTSE/JSE all-share index (.JASLH) closed down 0.88% to 68,094 points. The bluechip FTSE/JSE top 40 companies index (.JTOPI) ended down 0.91% to 62,326 points.