South African rand firms as investors chase higher yields

JOHANNESBURG: South Africa's rand strengthened on Wednesday, extending recent gains, as global appetite for risk and high yields rose on optimism around vaccine rollouts.

By 1505 GMT, the rand had firmed by 0.13% to 14.9450 against the US dollar.

South Africa has enjoyed slightly better bond investment inflows than other emerging markets, largely a function of the high yield on offer, with the central bank set to keep lending rates steady in 2021.

Offshore investors bought 2.68 billion rand ($179.53 million) of bonds last week, marking three straight weeks of inflows, data from the Johannesburg Stock Exchange showed on Tuesday.

Sentiment has also been buoyed by South Africa receiving its first COVID-19 vaccines this week as it eases lockdown restrictions.

"If yesterday's (Tuesday) nominal auction was anything to go by, it is clear that SA government bonds still have enough gas left in the tank and continue to enjoy much favour and support from offshore investors," RMB analyst Tebogo Mekgwe said in a note.

"The local currency is finding itself in familiar territory, straddling below the 15.00 handle."

Bonds also firmed, with the yield on the benchmark 2030 government issue down 9.5 basis points at 8.450%.

Upbeat sentiment was further reinforced by global markets, which surged on expected news of a solid stimulus package from US President Joe Biden's administration.

South Africa's FTSE/JSE all-share index closed 0.44% up at 63,010 points while the blue-chip FTSE/JSE top 40 index gained 0.42% to 57,829 points.

Commodities companies were among the best performers, helping the platinum miners index to a 1.5% gain while the coal miners index rose 2.2%, driven by higher commodity prices.