JOHANNESBURG – South Africa’s rand raced to an 11-week high against the U.S. dollar on Friday, supported by a risk rally as an unexpected fall in the U.S. unemployment rate brought back hopes of a swift economic recovery.
Stocks rose along with global markets as investors priced in an economic recovery following the shock of the coronavirus pandemic.
At 1505 GMT the rand was trading at 16.8600 per dollar, 0.3 percent firmer than its previous close, after hitting 16.7330 earlier in the session — its strongest since March 18.
The U.S. economy unexpectedly added jobs in May after suffering record losses in the prior month, offering the clearest signal yet that the downturn was probably over, though the road to recovery could be long.
The risk rally was also supported by new monetary stimulus for Europe.
“The sheer size of the monetary and fiscal support measures out of the developed world in light of the coronavirus shock has driven a risk-on frenzy as a global search for yield has led to financial spillovers into the emerging market space,” said economists at ETM Analytics.
“Technically, the 16.85 handle remains the line in the sand for the USD-ZAR, with the pair hovering around this level all morning. A sustained break below this level is likely to see a slide to 16.6500,” ETM analysts said in a note.
The Johannesburg All-Share index rose 2.85 percent to 54,722 points, while the blue-Chip Top-40 Index gained 2.79 percent to 50,200 points.
Banking shares were among the gainers up 6.57 percent with Nedbank 9.18 percent higher to 126.10 rand and Standard bank 6.22 percent stronger to 119.73 rand.
“Financials and properties are holding up the market. The international markets are supporting our market from a directional perspective,” said Nilan Morar head of trading at the Global Trader.
Bonds weakened, with the yield on the 10-year government issue adding 20.5 basis points to 8.945 percent.
