South Africa's rand rallies as reflation fears ease, stocks inch up

JOHANNESBURG: South Africa's rand gained for a third session in a row on Thursday, powering to a new one-week best as weaker-than-expected US inflation data halted an advance in Treasury yields and fuelled appetite for risk assets.

At 1550 GMT the rand was 1.23% firmer at 14.9000 per dollar, a touch softer than the session-high 14.8700, the unit's firmest level since March. 3.

Risk appetite has been driven by offshore events, with investors eyeing the speed of the global economic recovery and the pace of US lending rates.

The recent surge in the treasury yields sparked fears of a "taper tantrum" similar to that of 2013-14, but indications from the Federal Reserve that it would tolerate the bond spike, and slower price-growth, have calmed those fears.

As did news that the European Central Bank would conduct emergency bond purchases at a significantly higher pace over the next quarter.

"In recent weeks, the aggressive tightening anticipated in developed markets has completely unsettled markets, running well ahead of any rhetoric expressed by central banks, notably the Fed," said RMB's Nema Ramkhelawan-Bhana.

"Inclinations towards these rumoured moves are slowly starting to subside as data, such as yesterday's softer-than-expected US CPI print, calms the hype."

In the equities market, stocks rose, led by mobile operator MTN Group and investment firm Brait SE.

The Johannesburg All-Share index rose by 0.38% to 68,775 points, while the Top-40 index rose by 0.48% to 63,187 points.

MTN closed 12.24% to 83.47 rand after it reported a 60% earnings growth on Thursday and JP Morgan increased its target price to 110 rand from 90 rand.

Shares in Brait soared 17.65% after it said Virgin Active's UK business will get an additional 45 million pounds ($62.7 million) in funding from the fitness chain's shareholders as part of a restructuring. Brait holds just under 80% of Virgin Active.

Further gains were however capped by financial stocks, as lender Standard Bank fell 0.8% after reporting a 43% decline in headline earnings per share.