THE RAND rallied yesterday after a rise in US inflation was seen by investors as soft enough to keep monetary policy loose there, boosting demand for risk assets.
At 5pm, the rand was 0.75 percent firmer at R13.63 to the dollar, having earlier reached a session-best R13.58, to snap a three-day losing streak prompted by concerns that faster rising consumer prices in the US would lead to higher lending rates.
The high-yielding rand, which hit its strongest level in 28 months last Friday, is the top performing major emerging market currency this year, spurred by a boom in global commodity prices and the low-rate environment in developed markets.
“While the hot inflation data may not be enough to force the Fed to make any policy moves anytime soon, it may prompt the central bank to think twice about their ‘transitory’ mantra while fuelling speculation over official taper discussions,” said Lukman Otunuga, analyst at FXTM.
On the day, a widening of the current surplus to 5 percent of gross domestic product in the first quarter supported demand. But the rand’s rally was dented by signs of a slower economic recovery as manufacturing and mining output hit a speed bump.
“We think the shine from figures released today (yesterday) will fade in the coming months as headwinds facing the economy mount,” said Virág Fórizs, Africa analyst at Capital Economics.
Bonds continued to rally, with the yield on the benchmark 2030 government issue down 6.5 basis points to 8.65 percent.
Shares on the JSE slipped a tad from the previous day’s closing but largely brushed off concerns of higher inflation in the US. The all share index lost 0.2 percent at 67542.84 points and the Top40 index fell 0.23 percent at 61291.03 points.