JOHANNESBURG (Reuters) -South Africa’s rand firmed on Tuesday, holding on to gains made in the previous session after the dollar fell as investors consolidated recent gains in the greenback.
At 1550 GMT, the rand traded at 15.3200 against the dollar, 0.49% stronger than its previous close.
The rand is recovering after last week’s losses as bets for U.S. interest rate hikes increased on a hawkish shift by the Federal Reserve at a time when the South African Reserve Bank’s forward guidance was seen less hawkish than market expectations.
On Tuesday, the dollar fell for a second consecutive session with the greenback index trading at 96.397, down 0.29% against a basket of currencies. The dollar’s weakening came as Fed policymakers allayed investor fears of a very rapid tightening of monetary policy, while an imminent U.S. interest rate hike in March is already priced in.
But investors attributed the loss in dollar mostly to an almost unprecedented rally till Jan 28 when the currency hit 19-month peak.
“We believe that the rally from last week was a bit overextended and that the elastic had to snap back a little,” said Andre Cilliers, Currency Strategist at TreasuryONE, in an early morning note.
But the strength in emerging market currencies, including the rand, will not extend too far as investors will keep a keen eye out for the US non-farm payroll number which will be released on Friday, he said.
Stocks on the local bourse continued to rise for a second consecutive session, starting the second month of the year on a strong note after the January volatality.
A batch of promising trading statements from some South African companies and improving local economy’s outlook in the short term has kept the market momentum strong.
The benchmark all-share index rose 0.79% to 74,889 points and the blue-chip index of top 40 companies ended up 0.82% to 68,375 points.
South African government bonds also firmed, with the yield on the benchmark 2030 maturity down 5 basis points to 9.285%.
(Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Subhranshu Sahu and Angus MacSwan)
