South Africa’s rand firmer as Fed fears ease

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South Africa’s rand firmer as Fed fears ease

11:05 CAT | 18 May 2021

South Africa's rand firmed early on Tuesday as the dollar's recent climb was dented by falling bond yields and some caution ahead of a local lending rates decision later in the week. [Photo: Reuters]

South Africa’s rand firmed early on Tuesday as the dollar’s recent climb was dented by falling bond yields and some caution ahead of a local lending rates decision later in the week.

At 0700 GMT the rand ZAR=D3 was 0.48% firmer at 14.0350 per dollar compared to an overnight close of 14.1025.

Higher U.S. Treasury yields have hit demand for risk assets this year, but yields stalled as a Fed policymaker on Monday again reiterated that the central bank does not expect interest rates to rise until next year.

Caution ahead of a local decision on interest rates, due on Thursday, and consumer price-growth figures before that, has however limited the rand’s gains, traders said.

“It would be uncharacteristic of the USD-ZAR to break out its 14.0000-14.2000 tunnel ahead of Thursday’s SARB policy update,” said economists at ETM Analytics in a note.

In a poll by Reuters last week, all 25 economists surveyed saw the Monetary Policy Committee (MPC) of South Africa’s Reserve Bank (SARB) keeping its repo rate unchanged at a record low 3.5% for a fifth straight meeting.

“Traders may prefer to sit on their hands until after the SARB provides fresh insights into its assessment of prevailing economic conditions and prospective monetary policy,” the analysts added.

South African bonds were a touch firmer, with the yield on the benchmark 2030 government issue ZAR2030= down 0.5 basis points to 9.105%.

Source: Reuters