South Africa's rand firmer as U.S. Fed stance supports risk demand

Published 2021/05/14, 09:37
Updated 2021/05/14, 09:42
© Reuters.

JOHANNESBURG, May 14 (Reuters) - South Africa's rand firmed in early trade on Friday as global risk demand was aided by signs the United States central bank would keep lending rates low despite rising inflation.

A Federal Reserve official this week said the surprise jump in consumer inflation had not dented the bank's plans to keep its support for the economy. 0700 GMT the rand ZAR=D was 0.35% firmer at 14.0875 per dollar, compared to an overnight close of 14.1375.

The rand, which hit a 16-month high on Tuesday, has had a strong run since March, prompted by lower rates in the developed world, a surge in global commodity prices and signs the local economy is on track for a better-than-expected recovery.

But rising bonds yields in the United States have put a lid on those gains, while traders have pointed to seasonal factors that often see the rand lose ground to the dollar around this time of year.

"The question on most people's minds now I guess is, will this inflation spike be transitory as the Fed has suggested in just about every meeting/statement this year," Standard Bank (JO:SBKJ) chief trader Warrick Butler said in a note.

"If so then ... the demand for high-yield should resume and if not, then there are going to be quite a few emerging market central banks sitting behind the curve and biting their nails to the cuticle."

In a poll by Reuters this week, all 25 of economists surveyed see South Africa's Reserve Bank (SARB) keeping its repo rate unchanged for a fifth straight meeting at a record low 3.5% next week. prices eased, with the yield on the benchmark 2030 paper ZAR2030= up 1 basis point at 9.17%

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.