S. African rand hits 5-m high

The South African rand surged to its highest level in five months on Thursday, buoyed by improving risk sentiment amid growing speculation that the Federal Reserve might reduce interest rates in September, Reuters reported.

As of 1029 GMT, the rand was trading at 18.2175 against the dollar, marking a 0.29 per cent increase from its previous close. Earlier in the day, it briefly touched 18.1950, a peak unseen since mid-December.

Meanwhile, the dollar index edged up 0.2 per cent against a basket of currencies. Wednesday’s data revealed a slowdown in US core inflation to its lowest level in three years, accelerating expectations for rate cuts in the world’s largest economy.

Andre Cilliers, a currency strategist at TreasuryONE, noted, “Risk sentiment has improved on the back of the rate cut optimism, and we have the rand trading below the 18.30 mark… which is in line with stronger EM markets,”

In terms of economic releases, South Africa has no major data scheduled until next Wednesday, when local inflation figures are set to be unveiled. Nevertheless, economists cautioned that despite recent rand gains, markets remain wary ahead of the national election on May 29.

Jonathan Petersen, a senior markets economist at Capital Economics, warned, “We anticipate that risks associated with the upcoming South African election, among other factors, may trigger renewed currency weakness in the near future.”

On the stock market front, both the Top-40 and the broader all-share indices posted gains of around 0.4 per cent.

Additionally, South Africa’s benchmark 2030 government bond strengthened, with the yield dropping by 2.5 basis points to 10.365 per cent.