Rand firms in biggest gain in three weeks

The rand gained for the third consecutive session on Monday, while the JSE closed weaker amid softer global markets with the focus shifting to what the US Federal Reserve will do at its next policy meeting.

The rand firmed more than 1.2% in intraday trade, its biggest one-day gain in three weeks as “SA’s geo-diplomatic risk peaked and foreign investors are starting to dip their toes back into SA”, said Matete Thulare, head of forex execution at RMB, adding that “a strong dollar is reducing the scope for rand gains.”

Analysts say the rands ’ gains are partially due to some profit-taking after the currency has been in overbought territory at extreme levels.

At 5.53pm, the rand had strengthened 1.04% to R19.2947/$, having reached an intraday best of R19.2188/$. It had firmed 0.99% to R20.6727/€ and 1.03% to R23.9922/£. The euro was little changed at $1.0714.

The local currency has lost 13% against the dollar so far this year.

Bianca Botes, director at Citadel Global, said that “markets, looking towards the interest-rate decision [by the Fed], have kept the dollar near a two-month high, which is weighing on riskier market currencies.”

Investors are waiting to see how SA’s economy fared in the first quarter when GDP data is released on Tuesday. Economists are expecting the economy to have contracted further as the country continues to deal with rotational blackouts. Globally, investors are digesting what a strong US labour market means for the Fed’s interest-rate outlook.

“Friday’s non-farm payroll numbers showing that the US has added significantly more jobs than expected will bolster the case for a hawkish Fed at June’s federal open market committee meeting,” Botes said.

Oanda senior market analyst Craig Erlam said Friday’s jobs report did not settle the debate on whether the Fed should pause at next week’s meeting. “There were positives and negatives in the report, so it ultimately comes down to the inflation data next week.”

The JSE all share lost 0.68% to 76,603 points and the top 40 0.79%. Banks rose 1.27%, financials 1.19% and retailers 1.02%. Industrial metals fell 1.84%, resources 1.35%, precious metals 1.16% and industrials 1.05%.

At 6pm, the Dow Jones industrial average was 0.26% weaker , while in Europe, the FTSE 100 lost 0.1%, France’s CAC 40 0.96% and Germany’s DAX 0.54%.

Gold gained 0.57% to $1,958.43/oz and platinum 3.67% to $1,038.5/oz. Brent crude was 1.34% firmer at $77.22 a barrel.