UPDATE 1-South Africa's rand set for weekly gains, stocks join global rally on strong China, U.S. data

  • Reuters
  • Forex News
UPDATE 1-South Africa's rand set for weekly gains, stocks join global rally on strong China, U.S. data
Credit: © Reuters.

(Updates rand and bonds; adds stocks)

JOHANNESBURG, April 16 (Reuters) - South Africa's rand fell on Friday, but looked set for weekly gains after a rally the day before that took it to its best level in 15 months as falling yields in the United States drove global demand for risk assets.

At 1500 GMT, the rand ZAR=D3 was 1.06% weaker at 14.3225 against the U.S. dollar. On Thursday, it broke through a number of technical levels on its way to 14.1550, its strongest since January 2020.

The currency was up 1.6% since Monday.

"The current EM-friendly market environment with ample liquidity, in which economic optimism and risk-on sentiment prevail, offers the rand further appreciation potential," Elisabeth Andreae, FX analyst at Commerzbank (DE: CBKG ), wrote in a note.

"But the global environment and risk sentiment can change quickly, for example in the wake of recurring (U.S. Federal Reserve) tapering expectations. In our view, this limits the ZAR appreciation potential as well as domestic risks."

The dollar has been on the back foot this month as Treasury yields stabilize below one-year highs reached last month. Yields have fallen as the Fed reiterates its commitment to holding interest rates near zero for years to come, and on some concerns that a recent uptick in inflation will be temporary. FRX/

Lower U.S. rate expectations boost investors' appetite for emerging markets assets such as the rand, which offer higher returns but carry more risk.

In the equities market, stocks joined a global rally, as upbeat U.S. retail sales and manufacturing data as well as record first-quarter economic growth in China were offset by worries over rising coronavirus infections. Johannesburg All-Share index .JALSH closed 1.29% firmer at 68,699 points, its highest level since March 12, while the Top-40 blue chip index .JTOPI climbed 1.32% to 62,898 points, also posting its highest level since March 12.

"China's stellar economic prints, coupled with Thursday's better-than-expected data out of the U.S., shows the global economic recovery is indeed gathering momentum and such prospects appear to justify the bullish prospects for risk assets moving forward," Han Tan, market analyst at FXTM said in a note.

Notable sector moves were mining stocks, with the index .JMINI up 3.25% as gold hit a seven-week peak with retreating U.S. yields boosting appeal. Palladium and platinum also rose. GOL/

Bonds firmed, with the yield on the benchmark 2030 government issue ZAR2030= down 4.5 basis points to 9.060%.

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