JOHANNESBURG – South Africa’s rand strengthened slightly against the dollar early on Tuesday, boosted, like other emerging market assets, by diminished expectations of U.S. rate hikes this year.
The Top-40 futures index of the JSE securities exchange ticked up just 0.08 percent, suggesting the bourse would open flat at 0700 GMT.
At 0645 GMT the rand traded 0.76 percent firmer at 14.3600 to the greenback compared with Monday’s close.
This is the strongest the rand has been since a British vote to leave the European Union triggered a heavy sell-off in emerging market assets perceived as carrying higher risk.
“The rand … has broken through some key levels on the downside after the volatility-induced spike to above 15.6000 during the Brexit saga,” Standard Bank trader Oliver Alwar said in a note to clients.
“As hopes for further U.S. rate hikes are seen to be diminishing, the hunt for higher yielding EM bonds should continue resuming the carry play.”
South African government bonds also edged higher, with the yield for the 2026 benchmark shedding 3 basis points to 8.6 percent.
Foreign demand for South Africa’s high yielding bonds has risen, with the latest official data showing net inflows of 51.5 billion rand ($3.6 billion) so far this year, compared with just 4.6 billion rand during the same period in 2015. ($1 = 14.3552 rand) (Reporting by Stella Mapenzauswa) . (Reuters)