The JSE was firmer on Monday while its global peers were mixed. The rand was little changed as investors digested comments by the US Federal Reserve chair Jerome Powell.
Powell said on Monday the central bank was prepared to raise interest rates by half a percentage point at its next meeting if needed, paving the way for a more aggressive tone towards curbing inflation than he used just a few days earlier.
Powell indicated that a half-point hike might be on the table when the Fed next gathers in May and at subsequent sessions.
Until Monday, markets were expecting increases of 25 basis points at each of the Fed’s six remaining meetings for 2022.
However, the rand was resilient in the face of a strong dollar after Powell laid the groundwork for potentially bigger increases in interest rates to head off inflation, which is running at four-decade highs.
At 10am, the rand was little changed at R14.9273/$ and R19.6137/£, while it had strengthened 0.34% to R16.3974/€. The euro was 0.3% weaker at $1.0984.
The rand’s resilience has been boosted by the recent surge in commodity prices, such as coal, platinum group metals (PGMs) and gold.
A 25-basis-point hike is widely expected when the SA Reserve Bank’s monetary policy committee (MPC) meets this week, with the rate decision expected to be announced on Thursday.
“The decision and tone of the MPC statement will be important. If the MPC implies in its decision, or the press statement thereafter indicates that they are also open to a more aggressive hike — in the event that data suggests inflation will rise significantly — it could be supportive of the rand as expectations for local hawkishness catch up to expectations for Fed hawkishness,” said RMB economist Siobhan Redford.
The yield on benchmark R2030 government bond rose 15 basis points to 9.82% in mid-afternoon trade, the biggest rise in two weeks.
“Bonds are currently stuck in a push and pull situation where on the one hand they act as a safe-haven asset, while on the other hand, they are pricing in ever-changing rate hike expectations,” said RMB fixed income analyst Michelle Wohlberg.
At 10.15am, the JSE all share had gained 0.85% to 75,486.74 points and the top 40 0.91%. Industrial metals had risen 5.44%, resources 3.3%, banks 1.82%, financials 1.15% and precious metals 0.82%.
At the same time, the London's FTSE had added 0.25%, France’s CAC 40 0.2% and Germany’s DAX 0.43%.
Earlier in Asia, the Shanghai Composite gained 0.19%, Hong Kong’s Hang Seng 3.12% and Japan’s Nikkei 1.48%.
Gold lost 0.47% to $1,927.19/oz and platinum 0.62% to $1,034.5/oz. Brent crude was 0.97% weaker at $115.2 a barrel.
With Andries Mahlangu
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