The rand bounced back from Tuesday’s losses just a day after President Cyril Ramaphosa received the first of three parts of the state capture report from acting chief justice Raymond Zondo.
The report recommends wide-ranging repercussions for those who have pilfered state resources, including recouping losses and the laying of criminal charges.
“The state capture report may be a contributor to the rand’s strength, but a firmer gold price will have had more of an effect. Also, the dollar has lost some value and the euro is trading back above $1.13,” said TreasuryONE currency strategist Andre Cilliers.
In order to attract foreign investment to the country, the government needs to be seen to be acting against those accused of corruption. Foreign flows into the country have a positive effect on the rand.
“The release of the minutes from the latest meeting of the US Federal Reserve’s federal open market committee later on Wednesday are likely to indicate more of the same by the Fed on tapering and increasing interest rates this year. With no changes expected, what the Fed says is most likely already priced into markets,” said Cilliers.
The Fed is expected to have wound down its pandemic-induced stimulus package by the end of March, with interest rate increases expected to begin in the second quarter of 2022.
When US rates begin to rise, money is likely to move back to that country from emerging markets as the premium associated with the risk offered by investing in emerging-market assets falls.
“What also needs to be kept in mind is that volumes are still low as most people are still on holiday, so exaggerated moves in the currency markets can be expected for at least the next few days,” said Cilliers.
At 5.25pm on Wednesday, the rand had gained the most in five weeks, up 1.63% to R15.7544/$. It was also firmer against other hard currencies, rising 1.12% to R17.8671/€ and 1.17% to R21.3725/£. The euro gained 0.5% to $1.1338.
The rand has firmed 1.3% against the dollar so far in 2022.
Local bonds benefited from the firmer currency, with the yield on the benchmark R2030 10-year government bond falling four basis points to 9.38%. Bond yields move inversely to their prices.
The gold price was last seen up 0.44% at $1,822.71/oz, while platinum rose 2.46% to $1,000, a level last seen in late November. Brent crude gained for a third straight day, up 0.89% to $80.86 a barrel.
The JSE’s fractional gain on Wednesday saw it reach another record close at 75,060 points, while the top 40 was down a marginal 0.05%. Of the major indices, banks performed best, up 1.11%.
Liberty Two Degrees, which owns Sandton City, Eastgate and Midlands Mall, led the gains on the bourse, rising the most in a month, up 6.26% to R4.75.
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