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Investors eye rally of local currency

Currencies
Johannesburg - Investors will be keeping a close eye on the rand on Wednesday after the South African public holiday to see whether it continues to rally against the dollar.

Yesterday a further pullback in the dollar and US Treasury yields helped to extend a winning streak by emerging market equities to the longest since last August, with emerging market currencies broadly firmer against the dollar, though yesterday most retreated after hitting multi-month highs.

On Monday, the rand continued its upward move against the dollar, strengthening 0.9percent against the greenback and shrugging off the prospect of more trade protectionism from the US.

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File picture: Waldo Swiegers, Bloomberg

The rand opened at R12.6888 against the dollar from R12.7178 in the previous session, and gained marginally against the British pound at R15.7365 from R15.7551 to the pound, ahead of the Bank of England’s March policy meeting.

The £/rand conversion has fallen 6.5 percent in value this year, making it the worst performing major sterling pair thus far this year.

The rand was flat against the Euro at R13.6651 from R13.6591.

At 5pm on Monday, the rand was bid at R12.7690 as gold rose 0.42 percent to $1234/oz (R15 633) and platinum shot up 0.3 percent to $967/oz on the back of renewed push by precious gold stocks.

Last week the rand led the rally by emerging markets as it broke through the psychological R13 barrier against the dollar after the US Federal Reserve hiked rates moderately in a dovish tone that suggested a moderate monetary tightening policy.

The rand has strengthened 3 percent against the greenback since last Monday, its biggest rally this year. However, news from the G20 meeting over the weekend that the US had reaffirmed its commitment to protectionism hurt global and emerging market risk appetite.

Momentum SP Reid on Monday said the failure of finance ministers and central bank chiefs from the world’s top 20 economies to endorse a decade open trade tradition would hamper global growth.

“A slightly disappointing tonality (particularly as relates to global trade) out of the G20 meeting will also undermine overall market sentiment as investors make a slightly more circumspect assessment of anticipated global growth,” Momentum SP Reid said. The firm added that its initial target of around R12.52 to R12.54 to the dollar in the sessions ahead continued to be realistic.

South African Institute of Race Relations chief economist, Ian Cruickshanks, said the strengthening rand pointed to a positive inflation outlook.

On Wednesday, Statistics South Africa will be releasing the inflation figure for February 2017, while the Reserve Bank quarterly bulletin, which contains South Africa’s current account numbers, is also scheduled to come out today.

Next week the Reserve Bank’s monetary policy committee is to meet to decide on interest rates.


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