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The South African rand stabilised against the dollar on Tuesday, finding its feet after a heavy fall last week when sentiment towards the risk-sensitive currency slumped.
At 8:44pm, the rand traded at R15,81 against the dollar, down a modest 0,75 percent on its Monday close.
The rand lost over 6 percent against the US currency last week because of factors including severe power cuts by struggling state utility Eskom, deadly floods in an economically significant province and comments by the US Federal Reserve which suggested an aggressive rate hike outlook.
Analysts had been warning that the South African currency, which some investors use as a proxy for commodities exposure, looked overvalued before its recent fall.
“The drastic and sharp weakening is unlikely to be sustained. The possibility that the US Fed will disappoint at its next rate meeting in May would support the rand,” DG Capital Forex said in a research note, predicting a 15.00 to 15.75 rand-to-dollar range in the short term.
Stocks recovered from the previous day’s rout but Lukman Otunuga, senior research analyst at FXTM, warned that investors were cautious as fears over the impact of China’s new lockdowns lingered in the air.
“Caution is likely to remain the name of the game this week with sentiment fragile as strict lockdowns in China, concerns around a global slowdown, Fed rate hike fears and geopolitical risks leave investors on edge,” Otunuga added.
The Johannesburg All Share index gained 513 points or 0,74 percent to 70,264 points while the Top-40 index rose 0,7 percent to 63,336. Commodity stocks recovered, with the mining index up 1,07 percent, as gold rose, edging higher from a retreat to an over one-month trough in the last session. Palladium, used primarily in vehicle exhausts to curb emissions, also recovered.
The government’s benchmark 2030 bond was slightly firmer, with the yield falling 3 basis points to 9,88 percent. — Reuters
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