South African assets gain on US rate cut bets

Source: Reuters.

At 1610 GMT, the rand traded at 18.40 against the dollar, over 1% stronger than its previous close. The dollar last traded more than 0.4% weaker against a basket of currencies.

Speaking at a monetary policy conference on Tuesday, 2 July 2024, Fed Chair Jerome Powell said the US was back on a "disinflationary path," although he cautioned that policymakers needed more data before they could consider cutting rates.

The risk-sensitive rand often takes its cue from global drivers like US monetary policy.

The South African currency traded turbulently earlier this week on corporate sale-related flows out of the country, said Danny Greeff, co-head of Africa at ETM Analytics, without naming the sale.

"With that now seemingly completed, there is scope for the rand to recover meaningfully through the second half of the week. However, that would require the dollar to play ball," he added.

On Wednesday, the new ministers in President Cyril Ramaphosa's coalition government were sworn in.

Investors are looking for signs the government will prioritise reforms after years of sluggish growth in Africa's most industrialised economy.

"Of course, further out, the focus is on the local reform outlook. Investors want to see clear signs of relative political stability and reform progress through the months ahead for any would-be rand rally to have legs," Greeff said.

On the Johannesburg Stock Exchange, the Top-40 index closed more than 1.5% higher. South Africa's benchmark 2030 government bond was also stronger, as the yield fell 13.5 basis points to 9.815%.