The rand touched R14.20/$ for the first time in more than two months, firming against most major currencies on Wednesday as markets digested Tuesday’s GDP data which showed economic growth accelerated in the second quarter, ahead of expectations, while the number for the previous period was revised higher.
The rand is now about 5% firmer since US Federal Reserve chair Jerome Powell gave a speech that was more dovish than expected at the Jackson Hole symposium.
US employment numbers published on Friday were worse than expected, which further added to risk-on sentiment in global markets.
“Investor fears of an earlier normalisation in US monetary policy receded somewhat” after Powell’s speech, Nedbank’s economic unit said. “The unexpected slowdown in US job creation in August also unsettled investors, heightening worries about the Delta variant’s rapid spread and casting doubts over the Fed’s plans to start tapering its large bond purchases by year-end.”
Nedbank said the weaker dollar after the nonfarm payrolls data, coupled with firmer commodity prices, supported the rand further.
It warned, however, that markets will remain volatile with uncertainties “likely to subdue risk appetites for emerging market assets, weighing on the rand”. High commodity prices could mitigate this risk, but the bank expects the rand to encounter “a mild depreciation during the rest of this year, followed by more significant weakness in 2022”.
At 6.10pm the rand had firmed 0.52% to R14.2183/$, 0.67% to R16.8213/€ and 0.56% to R19.5956/£. The euro was 0.15% weaker at $1.1824.
Local bonds were also firmer with the yield on the benchmark R2030 government security falling three basis points to 8.82%. Bond yields move inversely to their prices.
Commodity prices were mixed, with gold little changed at $1,792.94/oz, while platinum fell 1.45% to $984.98. Brent crude gained 1.5% to $72.63 a barrel.
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