South Africa's rand firmer as Fed fears ease

JOHANNESBURG: South Africa's rand firmed on Tuesday as increased risk appetite lured investors away from the safe-haven dollar, even though there was some caution ahead of a local lending rates decision later in the week.

At 1500 GMT the rand was 0.74% firmer at 13.9975 per dollar.

Higher US Treasury yields have hit demand for risk assets this year, but yields stalled on Tuesday as market participants grew increasingly confident that the Federal Reserve will hold off on hiking interest rates for the time being, despite worrisome near-term inflation spikes.

Caution ahead of a local decision on interest rates, due on Thursday, and consumer price-growth figures before that, has however limited the rand's gains, traders said.

In a poll by Reuters last week, all 25 economists surveyed saw the Monetary Policy Committee (MPC) of South Africa's Reserve Bank (SARB) keeping its repo rate unchanged at a record low 3.5% for a fifth straight meeting.

"Traders may prefer to sit on their hands until after the SARB provides fresh insights into its assessment of prevailing economic conditions and prospective monetary policy," said economists at ETM Analytics in a note.

Stocks were flat, with the rand lifting companies that tend to benefit when the currency is stronger, including retailers and financial firms.

The Johannesburg Stock Exchange's Top-40 Index closed 0.01% higher at 61,190 points and the broader All-Share Index climbing 0.06% to 67,255 points. Telkom, South Africa's leading landline operator part-owned by the state, rose almost 14% after flagging an expected 145% increase in full-year profits.

Drinksmaker Distell closed 5% higher after announcing it had been approached by Heineken about a possible acquisition of the majority of its business.

South African bonds firmed, with the yield on the benchmark 2030 government issue down 3.5 basis points to 9.075%.