JOHANNESBURG: South Africa's rand consolidated its overnight gains against the dollar Thursday, but could struggle to hold its ground given weak domestic economic fundamentals and looming rate hikes in the United States.
At 0647 GMT, the rand traded 0.43 percent firmer at 11.9440 to the greenback, compared with Wednesday's close at 11.9950 in New York.
Government bonds were similarly firmer, with the yield on the benchmark 2026 government bond falling 6.5 basis points to 7.66 percent.
The firmer rand was largely in response to the dollar's modest losses after data pointed to the world's biggest economy slowing significantly in the first quarter, which could delay the Federal Reserve's decision to begin hiking interest rates.
Stronger than expected jobs numbers on Friday could, however, reignite the argument for policy tightening in the U.S., drawing investors away from emerging markets.
A weak outlook for South Africa's own economy, worsened by chronic electricity shortages, also points to the rand eventually running of steam.
"If tomorrow's U.S. labour data does indeed rekindle U.S. rate hike fears, then prevailing rand strength could reverse quickly over the coming days," Barclays Africa said in a market note.
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