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Markets

South Africa's rand firms as vaccine hopes boost risk demand

At 0700 GMT the rand was 0.14pc firmer at 18.3200 per dollar, versus an overnight close of 18.3460. Optimism t
20 May 2020
  • At 0700 GMT the rand was 0.14pc firmer at 18.3200 per dollar, versus an overnight close of 18.3460.
  • Optimism that a COVID-19 vaccine trial is showing promising results has lifted demand for emerging market currencies in recent sessions.

JOHANNESBURG: South Africa's rand edged up early on Wednesday, clinging on to gains spurred by global hopes of a coronavirus vaccine even as investors remained cautious and limited their bets a day ahead of a central bank rate decision.

At 0700 GMT the rand was 0.14pc firmer at 18.3200 per dollar, versus an overnight close of 18.3460.

Optimism that a COVID-19 vaccine trial is showing promising results has lifted demand for emerging market currencies in recent sessions, but fears around the depth of a global recession due to the pandemic have dampened risk appetite.

"For now, it seems that the market may be in wait-and-see mode ahead of tomorrow's SARB rate verdict. This means that we could be in store for some more range-bound trading in the session ahead," economists at ETM Analytics said in a note.

A Reuters poll of analysts expects the South African Reserve Bank (SARB) to cut rates by 50 basis points (bps) to 3.75pc, but some see the possibility of a deeper, 100 bps cut. That's on top of 225 bps-worth of rate reductions since March.