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JOHANNESBURG, Jan.26 (Reuters) – The South African rand strengthened by more than 1% on Tuesday in a return of risk appetite globally as investors continued to weigh the benefits of the stimulus budget and coronavirus vaccine rollout over concerns over second and third wave infections.
At 3:00 p.m. GMT, the rand was 1.15% firmer at 15.0450 per dollar, from an open level of 15.2425.
The South African currency, along with other emerging market currencies, was boosted by a weaker dollar, which lost 0.2% in the session.
Optimism over a US fiscal stimulus package has spurred risk-taking in recent weeks, although that enthusiasm has been dampened in recent sessions by the rise in COVID-19 infections in major economies.
South Africa’s still high yield, after the central bank narrowly decided not to lower lending rates last week, partly shielded the rand from the country’s slow progress in securing vaccines. .
South Africa, which has recorded more than 1.4 million COVID-19 cases and 41,000 deaths, by far the continent’s most infections, has yet to receive its first doses of the coronavirus vaccine.
Bonds weakened slightly, as the yield on the 2030 benchmark paper increased 2 basis points to 8.780%.
In the equity market, however, stocks retreated from record highs as investors focused more on potential obstacles to the planned $ 1.9 trillion stimulus by US President Joe Biden, which weighed on the feeling.
The Johannesburg All-Share index fell 0.99% to 63,923 points after hitting an all-time high of 65,346 points in the previous session, while the Top 40 index fell 1.16% to 58 720 points against a record 60,264 points.
“The markets expected Democrats to act quickly to push through the massive stimulus bill through Congress,” Milan Cutkovic, market analyst at AxiCorp, said in a note.
“However, negotiations could last for several weeks and market players have started to realize that the package faces significant hurdles.”
Among the declines, the heavyweights of the media market and internet company Naspers were down 4.96% while its international branch Prosus pulled out from a record low, down 5.21%. Prosus owns a third of Chinese tech giant Tencent, which lost 6.26%. (Reporting by Mfuneko Toyana and Nqobile Dludla; editing by Susan Fenton)
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