South Africa's rand firmer on improving economy, global yield hunt

JOHANNESBURG: South Africa's rand firmed on Monday, hurdling the key technical level of 14.50 on its way to a one-year best as signs of a local economic rebound and continued stimulus in the United States lifted demand for the currency.

At 1500 GMT, the rand was 0.06% firmer at 14.4625 per dollar, a touch off the session best of 14.4625, which was its strongest since January 2020. Stocks hit an all-time high.

Crucially, it was the first time since early January the unit broke below the 14.50 technical resistance mark seen as a buy-target by traders.

"The rand's path through least resistance has been a much-discussed topic over the past few months with flows by exporters dominating and international investors stuck with piles of free money, which needs to find a high-yielding home," said Standard Bank's chief trader Warrick Butler.

"This is not going to change until we either get a diabolical budget from Mboweni (unlikely) or there is a global black swan event which throws us a curve ball."

Last week, South Africa recorded a better-than-expected expansion in industrial production, up 1.8% in December, while mining output also inched up, suggesting faster economic momentum in 2021 following the coronavirus-induced contraction in 2020.

Finance Minister Tito Mboweni is set to deliver the 2021 budget on Feb. 24, showing better-than-forecast revenue collection.

South African assets often rally in the weeks ahead of the budget, falling thereafter, according to analysts.

Bonds were weaker, with the yield on benchmark 10-year government issue up 4 basis points to 8.550%

The stock market firmed, reaching all-time highs on Monday, as optimism about the rollout of COVID-19 vaccines boosted global market sentiment.

The benchmark FTSE/JSE all-share index climbed 1.22% to end the day's trading at 67,125 points, reaching an all-time record, while the bluechip FTSE/JSE top-40 companies' index ended up 1.65% to an all-time peak of 61,675 points.

Among the gainers were Sasol, which rose 1.48% on the back of a higher oil price and Steinhoff, which jumped 22.87% after its former auditor Deloitte agreed to pay $85 million to settle certain claimants as part of the retailer's proposed $1 billion global lawsuit settlement plan.