Weaker dollar comes to rand’s rescue

File picture: Philimon Bulawayo

File picture: Philimon Bulawayo

Published May 26, 2017

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Johannesburg - The rand extended gains against the dollar to a two-month high on Thursday as the greenback stumbled after the US Federal Reserve dialled down expectations it would hike interest rates soon.

Stocks ended slightly lower, led by retailers Massmart and TFG, after the duo reported weaker

financial results.

At 3.30pm, the rand had firmed 0.54 percent to $12.85, its firmest since March 30, compared with a close of $12.92 in New York on Wednesday. Traders said the rand was also maintaining the positive momentum from the previous session after inflation slowed faster than expected.

“It is not often that a lower inflation print, which indicates lower interest rates, translates into a stronger currency but that is pretty much what happened yesterday,” Standard Bank chief currency trader Warrick Butler wrote in a note.

“It continues to show how desperate the market is for yield and the fact that we may start seeing rate cuts in South Africa sooner rather than later caused a flood of bids for local paper, and this subsequently caused the rand to strengthen.”

The SA Reserve Bank kept interest rates steady yesterday as it weighed price pressures against expectations the economy would recover more slowly than hoped.

In fixed income, the yield for the benchmark government bond due in 2026 rose 1 basis point to 8.51 percent.

On the bourse, the JSE Top-40 index lost 0.52 percent to 47572 and the broader All-share index was down by the same margin at 54 028.

Massmart fell 6.7 percent after Wal-Mart said same-store sales fell 2 percent in the first five months of this fiscal year.

REUTERS

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