Improved risk appetite in global markets helped South Africa’s rand to firm against the dollar on Thursday despite interest rates being held at 12%, while mining shares boosted local stocks.
The rand was trading at nine against the dollar at 3.50pm GMT, about 2,6% stronger than its last New York close of 9,24, off its session high of 8,9195 and well away from the near seven-year low of 9,45 hit on Wednesday.
Analysts said the return of some calm in global markets was the main driver for currency markets.
”We do not expect the decision to have a visible impact on the rand,” said Alvise Marino, emerging market economist at IDEAGlobal.
”The [foreign exchange] market is focused almost exclusively on risk appetite, piled up in the emerging market-bearish bandwagon.”
South Africa’s central bank said a weaker rand, which has lost about 20% against the dollar so far this year, was a risk to the inflation outlook and it hoped it will recover.
Marino said the rand, which often appeals to yield-seeking capital would remain largely volatile in the prevailing global market turmoil.
Johannesburg’s top-40 index of blue chip stocks rose 1,5% to 19 242,97 points and the broader All-Share index gained 1,42% at 21 252,29 points, erasing only some of the market’s recent heavy losses.
Anglo Platinum, the world’s largest producer of platinum, starred, soaring 11,02% to R665.
Other big gainers included Telkom, up 9,51% to R108,31 and Naspers, which rose 7,53% to R150.
”It’s pretty much been driven by the miners … benefitting from better metal prices,” Roy Lamb, a trader at Investec Securities said.
But it was uncertain whether local markets would be able to hold onto their gains as investors remain nervous.
”At the moment the guys are just feeling a little oversold … there is a bit of bottom fishing, plenty of nervousness and volatility is the name of the game,” Lamb said.
Financial services firm Sanlam was the worst blue chip performer, losing 4,80% at R16,85.
Central bank Governor Tito Mboweni said local banks remained stable and were not exposed to subprime industry problems, which triggered the global credit crises.
But the crisis had knocked local assets and would ultimately dampen economic growth.
Government bonds weakened as investors shifted back to equities, and were little changed from before the rates announcement — which was largely expected.
The yield on the benchmark 2015 bond was 5,5 basis points up at 8,855% compared to Wednesday’s close, while the 2036 yield added seven basis points to 8,165%.
The yield on the two year bond was nine basis points up at 9,275%. – Reuters