South African rand strengthened on Tuesday as fresh hopes of additional U.S. stimulus package outweighed fears that the local medium-term budget would show wider government deficits and deeper debt in Africa’s most industrialised economy.
At 0630 GMT, the rand ZAR=D3 was 0.28% firmer at 16.1675 per dollar, continuing a seven-session winning streak that has seen the unit reach its best level since mid-September and approach the key 16.00 technical level.
The stop-start negotiations between opposing sides in the U.S. Senate over a $2 trillion stimulus have kept currencies subdued, but the rand has managed to eke out gains, largely owing to its high-yield status.
A spokesman of house of Representatives Speaker Nancy Pelosi said on Monday she was hopeful that Democrats and the Trump administration would reach agreement on a coronavirus relief bill before the Nov. 3 elections. Finance Minister Tito Mboweni set to deliver his medium-term budget speech on Wednesday, investor focus is bound to shift to local issues, likely restraining major bets on the rand.
Economists polled by Reuters last week signalled that the fiscal deficit was set to widen more than projected in June’s emergency COVID-19 budget, while a drop in tax revenue following job losses and lower household expenditure would mean a slower return to growth. traded firmer in early deals, with the yield on the benchmark 2030 government issue ZAR2030= down 2.5 basis points to 9.255%.