Rand ends the day stronger

The rand remained firmer against the dollar after President Cyril Ramaphosa lifted some of the restrictions imposed on self-generation of power. Although pulling back a little in late-afternoon trade, the rand closed the day stronger, gaining 0.87% to R13.5976/$.

The rand remained firmer against the dollar after President Cyril Ramaphosa lifted some of the restrictions on companies generating their own power.

Though pulling back a little in lateafternoon trade, the rand closed the day stronger, even after data on Thursday showed inflation in the US accelerated to 5% in May from 4.2% the previous month.

While inflation fear in the US in recent months has seen US bond yields rise, this was not the case on Thursday when the 10-year yield fell by a basis point to 1.47%.

Central bankers have been urging markets to ignore the higher inflation rate as they believe it is temporary as the world recovers from the economic devastation of the Covid-19 pandemic.

“The Fed was united and unwavering in its message, and the market bought it,” said Oanda analyst Sophie Griffiths.

At 5.40pm, the rand had gained 0.87% to R13.5976/$, 0.94% to R16.5446/€ and 0.61% to R19.2408/£. The euro had fallen 0.1% to $1.2168.

Government bonds also firmed, with the yield on the R2030 falling six basis points to 8.65%. Bond yields move inversely to their prices.

Earlier, President Cyril Ramaphosa announced that the licence-free threshold for companies wanting to generate their own power would be lifted to 100MW, from the current 1MW and a recently gazetted proposed amendment by mineral resources & energy minister Gwede Mantashe to raise it to 10MW.

The announcement was well received by companies and civil society. The Organisation Undoing Tax Abuse’s (Outa) said: “After grim days of load-shedding, SA’s future is brighter with the announcement that red tape is being cut for embedded generation projects.

“The need for the presidential intervention in this is a clear indication to us that it’s time for minister Mantashe to be moved out, to make way for someone who understands and will drive a strong renewable energy future for SA,” said Outa’s parliamentary and energy adviser, Liz McDaid.

North West University Prof Raymond Parsons said: “The positive statement by President Cyril Ramaphosa today on a more liberal approach to energy supply in SA is good for investment sentiment at a time when the country needs to take full advantage of the current economic recovery.”