South African rand supported by carry trade and precious metals
11:30 am Tuesday, October 22nd, 2024
JOHANNESBURG (Reuters) -The South African rand was stronger on Tuesday, buoyed by global precious metals prices and its appeal for carry trades.
At 1502 GMT, the rand traded at 17.5050 against the dollar, 0.6% stronger than its closing level on Monday.
Carry trades involve investors borrowing funds in countries with low interest rates and putting the money in countries with higher rates.
ETM Analytics said in a research note that a rise in domestic bond yields should ensure the rand retains its ability to attract portfolio inflows.
“Another factor worth considering is the performance of the gold price … versus an oil price which remains more subdued, to ensure that SA’s (South Africa’s) terms of trade remain supportive,” it added.
Gold hit an all-time peak on Tuesday, while platinum also rose. Those precious metals are key South African exports.
Early on Tuesday, central bank data showed a leading business cycle indicator fell 0.7% in August, erasing the previous month’s increase.
While there has been a pickup in business confidence in South Africa since the formation of a coalition government in June and strength in retail sales recently, other sectors like mining remain in a slump.
Focus on Wednesday will turn towards September inflation figures. Economists polled by Reuters expect year-on-year inflation last month of 3.9%.
On the stock market, the Top-40 index closed about 0.4% lower.
South Africa’s benchmark 2030 government bond was stronger, with the yield down 2 basis points to 9.325%.
(Reporting by Tannur Anders and Bhargav Acharya; Editing by Louise Heavens and Mark Potter)
