JOHANNESBURG - South Africa’s rand traded below 12 per dollar on Wednesday for the first time since May 2015, extending a rally sparked by an improving domestic political environment and supported by global risk-on sentiment and the greenback’s retreat, according to Bloomberg.
The South African currency has surged since Cyril Ramaphosa won the race to succeed Jacob Zuma as ANC leader last month, putting him in pole position to become the country’s next president.
Bloomberg further reported that the currency advanced 0.5% to 11.9711 per dollar by 10.45am in Johannesburg, bringing gains in the past three months to 15 percent, the most out of 31 major currencies tracked by Bloomberg. The yield on rand-denominated government bonds due December 2026 fell four basis points to 8.32 percent, the lowest since March.
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News that Ramaphosa could be the next president of the country has fueled optimism that South Africa may avert further credit-rating downgrades as the new leadership takes steps to root out corruption and stimulate the ailing economy. Inflows into the nation’s stocks market are running at record levels.
Phillip Pearce, a trader at TreasuryOne Ltd. in Johannesburg, told Bloomberg, “Investors are loving us at the moment. The dollar is taking a pounding and global markets are still on the hunt for yield. There’s not a lot of risk going now. South Africa seems like a good bet.”
The rand could appreciate to as low as 11.50 per dollar if Zuma is removed from office, Pearce further said.