South Africa’s rand firmer on high-yield hunt, stocks inch up

South Africa’s rand firmed on Wednesday, erasing losses from the previous session as investors continued to see value in the high-yielding, high-risk currency despite an uptick in local inflation.

At 1530 GMT the rand was 0.45% firmer at 14.2400 per dollar, having tripped to a two-day low of 14.3300 on Tuesday.

“It feels like the local currency is searching for a fresh directional catalyst before making its next move. Even the latest inflation figures published earlier today failed to move it,” said Lukman Otunga, analyst at FXTM.

Headline consumer price inflation rose to 3.2% year-on-year in March from 2.9% in February, data from Statistics South Africa showed, mainly due to sharp increases in energy and fuel prices.

Price-growth remains well within the lower end of the central bank’s 3% to 6% target, meaning a hike in lending rates similar to those in other emerging markets remains unlikely with the local regulator emphasising inflation was contained.

“While SA could be poised for less currency depreciation in the medium-term from what it typically faces as a consequence of the past decade weakening in fundamentals, in the shorter-term it is vulnerable to correction,” said Investec’s Annabel Bishop.

Shares on the Johannesburg Stock Exchange (JSE) pared losses in the final trading hour on Wednesday, closely following the turn in the US market at 1400 GMT.

The Dow Jones Industrial Average, after opening lower 1330 GMT, slowly gained momentum and turned positive as a slew of positive results started flowing, especially led by health insurers.

On the local market, the benchmark all-share index ended 0.46% up to 67,146 points. The blue-chip index of top 40 companies closed up 0.46% to 61,399 points.

“There isn’t really any discernible theme playing out in the local market… Very strong earnings that we’ve seen coming from the US is what’s driving JSE,” said Sithembile Bopela, Investment Analyst at FNB.

The local banks, however, posted losses as concerns around the slow vaccination drive and a resultant slower economic recovery lingered, she added. The bank index was down 0.6%.