The rand extended gains on Thursday, a day after logging its biggest one-day gain against the dollar in a month, further boosting the outlook on inflation.
The rand’s recovery followed broad-based weakness in the dollar after the US Federal Reserve signalled the much-anticipated shift in its policy path, suggesting that its months-long campaign to fight inflation through higher interest rates had run its course.
The implied Fed policy pivot carries positive spinoffs for emerging markets such as SA, which may attract large portfolio inflows through shares and bonds from global investors.
The rand traded at R18.58/$ by early afternoon on Thursday, after gaining 1.5% on Wednesday night in the wake of the Fed’s policy meeting, which left interest rates unchanged as expected. As recently as Monday, the rand hit R19.13/$, indicating the high degree of currency volatility.
The relatively stronger rand comes against the backdrop of a depressed oil market, implying that SA can have another cut in fuel prices in early January. The lower fuel price will further improve the outlook on headline inflation, which together with lower demand pressures, could persuade the Reserve Bank, to ease policy in 2024.
With the dollar weakening, commodity prices also benefited noticeably, as did commodity shares on the JSE.
AngloGold Ashanti surged 12% to R347.33, Gold Fields 10.70% to R293.76 and Sibanye-Stillwater 10.67% to R23.14.
The whole resource complex was significantly higher on the day, indicating a sharp U-turn in investor perceptions of the global economy.
Commodity markets tend to rally in a lower interest rate environment. The resources index, made up of Anglo American, BHP and Sasol among other shares, surged 7.6% in its biggest one-day gain in just over a year.
The gains in resources, along with those of a broad swathe of other stocks, boosted the all share, which leapt the most since November 2022 — a whopping 3.2% to 74,921.49 points. It is, however, worth noting that this comes off a fairly low base. The move puts the index in positive territory for the year, up 2.55%.
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