Reuters, JOHANNESBURG, May 18 – Even though there was some caution ahead of a local lending rate decision later this week, the rand strengthened on Tuesday as increased risk aversion enticed investors away from the safe-haven dollar.
The rand ZAR=D3 was 0.74 percent firmer at 13.9975 per dollar at 1500 GMT.
Higher U.S. Treasury yields have dampened appetite for risk assets this year, but yields stalled on Tuesday as investors become more optimistic that the Federal Reserve would hold off on raising interest rates for the time being, citing worrying near-term inflation surges.
Traders said caution has restricted the rand’s gains ahead of a local interest rate announcement on Thursday and consumer price inflation estimates before that.
In a poll conducted by Reuters last week, all 25 economists polled predicted that South Africa’s Reserve Bank (SARB) will hold its repo rate at a record low of 3.5 percent for the fifth consecutive meeting.
“Traders will want to wait until the SARB offers fresh insights into its evaluation of current economic conditions and prospective monetary policy,” ETM Analytics economists wrote in a statement.
Stocks remained down, with the rand supporting businesses that profit from a stronger economy, such as supermarkets and financial firms.
The Top-40 Index of the Johannesburg Stock Exchange.
The JTOPI and the wider All-Share Index both finished 0.01 percent higher at 61,190 points.
JALSH is now at 67,255 points, up 0.06 percent.
Telkom, South Africa’s largest landline provider and a state-owned company, soared nearly 14% after announcing a 145 percent rise in full-year earnings.
After reporting that Heineken HEIN.AS had contacted it about a potential takeover of the bulk of its business, Distell DGHJ.J closed 5% higher.
The yield on the benchmark 2030 government issue ZAR2030= fell 3.5 basis points to 9.075 percent, indicating that South African bonds firmed.
(Mfuneko Toyana and Emma Rumney contributed reporting; Barbara Lewis edited the piece.)