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South Africa’s rand firms as carry trade offers support

South Africa’s rand firms as carry trade offers support

28 August 2020

 

South Africa’s rand recovered in early trade on Friday, after suffering losses in the previous session as the U.S. dollar strengthened on the Federal Reserve’s new strategy to lift growth and inflation.

At 0632 GMT, the rand traded at 16.9175 per dollar, 0.79% firmer than its close on Thursday.

The currency gained on Friday as investors bet that the Fed’s strategy to lift inflation and spur growth would keep its interest rates lower for longer, supporting rate differentials with the higher-yielding emerging markets.

 

 

Demand for the rand and domestic bonds this year has largely been supported by the elevated yield on offer due to high interest rates compared with developed markets.

South Africa’s repo rate now stands at 3.5%. The central bank has cut interest rates by 300 basis points since the start of the year in response to fading price pressures and a weak economic outlook because of the COVID-19 pandemic.

In fixed income, the yield on the government bond due in 2030 was 3 basis points higher at 9.330% in early trade.

 

Source: Reuters

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