The rand jumped more than 1% to a 2-1/2 month high on Tuesday in an emerging market rally spurred by growing hopes for a global economic recovery, prompting investors to ditch safe-havens for high yielding assets.
At 1530 GMT, the rand was 1.34% firmer at R17.13 per dollar, its best since March 19 and close to technical resistance near R17.10 that could unlock further gains.
The currency ended May on the front foot, buoyed by the South African central bank’s support for the economy, including a fourth lending rate cut in as many months and a bond-buying programme that has eased liquidity strains.
The further easing of nationwide lockdown restrictions on Monday, allowing firms and mines to operate at full capacity and more freedom of movement for consumers, has also improved sentiment towards Africa‘s most industrialised economy.
That has coincided with growing appetite for high-yielding – albeit riskier – emerging market assets, spurred by an easing of lockdowns around the world as coronavirus infections stabilise and stimulus measures soothe investors’ growth worries.
“At current levels, much negativity has already been priced into the rand,” said Nedbank analysts in a note.
“Should capital flows start to emerge and global trade pick up, the rand would benefit from such flows, particularly given the fact that S.A. real bond yields are among the world’s highest and most attractive.”
Bonds also rallied, with the yield on the benchmark down 15.5 basis points (bps) to 7.335% and that on the 2030 paper falling 2.5 bps to 8.735%.
Stocks enjoyed gains too, in line with global markets, which reached three-month highs.
The Johannesburg Stock Exchange’s Top 40 index rose 2.91% to 48,318 points, while the broader All-Share index strengthened just over 3% to 52,496 points.
Companies hit hard by the lockdown were the biggest gainers, including property and financial services firms and retailers.
The biggest gainer on the blue-chip list was fuel firm Sasol , up over 16%.