South African rand hovers near five-week peak as dollar softens

JOHANNESBURG: South Africa's rand retreated in early trade on Wednesday, though the unit hovered near its five-week best as a softer US dollar and global economic recovery hopes boosted demand for riskier but high-yielding currencies.

At 0630 GMT, the rand traded at 14.5350 against the dollar, 0.21% weaker than its previous close. The currency was not far off its five-week high of 14.4900 hit in the previous session.

"Hopes of a global economic recovery as countries continue their vaccination rollout programmes have led to lower yields and ongoing risk appetite," Bianca Botes, executive director at Citadel Global said in a note.

The dollar softened to a two-week low against a basket of currencies on Wednesday after US bond yields declined as traders rolled back aggressive expectations that the Federal Reserve will tighten its policy earlier than pledged.

Locally, investor focus is on manufacturing activity and business confidence data expected later in the day. The data will give some insights into the health of an economy that last year suffered its worst annual decline in a century, after the COVID-19 pandemic disrupted economic activity.

Government bond firmed in early deals, and the yield on the instrument due in 2030 fell 2 basis points to 9.445%.