The rand maintained its yield advantage over developed-market investments after US Federal Reserve chair Jerome Powell’s less hawkish comments saw US Treasury yields tumble.
At the much-anticipated Jackson Hole symposium on Friday, where central bankers gather to discuss pressing economic issues, Powell indicated that the Fed could begin withdrawing some of its easy-money policies before the end of the year, though interest rates hikes may still be some way off.
Powell’s softer tone saw money rush back to emerging markets, with the rand and local bonds benefiting as investors took advantage of the higher return locally when compared to that in developed markets due to the risk premium associated with investing in SA.
Gains by the rand on the day saw it rise 4.15% against the dollar for the week, which was its best since December 2020.
At 6.30pm, it had strengthened 1.23% to R14.7298/$, 0.85% to R17.3741/€ and 0.7% to R20.2834/£. The euro added 0.33% to $1.1794.
Powell said the US economy was at a point where it no longer needed as much policy support, however, that did not mean interest-rate increases were looming as there is still “much ground to cover” before the economy hits full employment.
Local bonds firmed with the yield on the benchmark R2030 government bond falling five basis points to 8.81%. Bond yields move inversely to their prices.
Tapering will not be put off for long and a December start may well be on the cards, said Oanda senior market analyst Craig Erlam. “But Powell may have refrained from saying too much today, and instead, gave the Fed a few more weeks to assess the data ahead of the September meeting.”.
“Powell's comments leave plenty open to interpretation. The data over the next few weeks may improve, the Covid-19 trend may reverse itself and provide more comfort for policymakers.”
The JSE all share also firmed on the day, rising 0.86% to 67,646 points, with the top 40 adding 0.88%. Precious metals rose 3.01%, resources 2.16%, industrial metals 1.86%, banks 0.89% and listed property 0.84%.
The all share rose 2.48% for the week, with the best performances coming from precious metals, resources and banks, which gained 5.69%, 4.64% and 4.57%, respectively.
Massmart, the owner of Makro, Builders Warehouse and Game, was the biggest loser on the JSE, with its share price falling the most in two weeks after it said on Friday it has lost R1.3bn in stock in the July looting spree. Massmart said two of its warehouses and 43 stores were damaged. Its share price fell 3.13% to R54.76.
Gold rose 1.37% to $1,816.41/oz and platinum 3.21% to $1,010.69. Brent crude was 1.45% firmer at $72.56 a barrel.
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