South Africa's rand firms as US stimulus hopes boost risk taking

JOHANNESBURG: South Africa's rand strengthened on Tuesday, recovering from a slip in the previous session, as optimism about the passing of a $1.9 trillion stimulus programme in the United States boosted risk demand.

At 1500 GMT the rand was 0.71% firmer at 14.7750 against the dollar, in line with gains in most emerging market currencies.

US lawmakers have a budget outline to help to push US President Joe Biden's $1.9 trillion COVID-19 relief package through Congress without Republican support and the legislation is predicted to pass before March 15.

Analysts see the fiscal spending, coupled with continued ultra-easy Federal Reserve monetary policy, dragging down the dollar in the longer term, feeding demand for risk assets.

"The much-awaited US stimulus package has encouraged the rand," said DailyFX analyst Warren Venketas. "Should this come to fruition, the external financial environment would result in an extremely supportive climate for the local currency."

South Africa's main indexes hit another all-time peak, continuing their five-day winning streak, led primarily by hope a US stimulus package will channel money into emerging market stocks.

But the upward move on Tuesday was marginal as investors worried about South Africa's inability to start its first phase of COVID-19 vaccinations and hence its prospect of a faster economic rebound.

The benchmark all-share index was up by 0.16% to at the day's end to 65,163 points and the bluechip top-40 companies index ended 0.03% up to 59,664 points.

The rally was driven by real estate and consumer retail companies, which helped offset a dampening mood.

Bonds weakened, with the yield on the benchmark 2030 issue rising 7 basis points to 8.58%.