JOHANNESBURG (Reuters) – South Africa’s rand extended gains on Friday despite the dollar regaining its footing, as investors picked the currency over other emerging markets to take advantage of the carry trade on offer.
Stocks fell, suppressed by a slide in commodity prices.
At 1530 GMT the rand was 0.28 percent firmer at 13.2600 per dollar, having opened the week at 13.4650, a gain of more than 1.5 percent, and well below the crucial 13.50 technical level.
“When looking at month-to-date performance of the rand against G10 countries, rand bulls will find it encouraging to note that an across the board outperformance has been posted,” analysts at Investec said in a note.
The rand, along with the currencies of emerging markets such as Brazil, India, Mexico, Indonesia, and Turkey, is often used as a carry target, with investors borrowing money at a low interest rate and investing it in a high-yielding currency to earn the better interest rate.
With the South African Reserve Bank set to keep lending rates steady at 6.5 percent at Thursday’s policy meeting, and inflation sliding to the bank’s favoured midpoint, the rand offers an attractive carry trade compared to the likes of Turkey, where political turmoil and soaring inflation have spooked speculators.
All 25 economists surveyed by Reuters in the past week said the Reserve Bank would keep rates unchanged.
Bonds were slightly weaker, with yield on the benchmark yield due in 2026 up 1 basis point at 8.735 percent.
Shares fell for a fourth straight session, with gold prices sliding to seven-month lows as demand was subdued, easing risk sentiment and expectations of higher U.S. interest rates.
The benchmark Top-40 index closed 0.85 percent lower to 50,244 points while the broader All-Share index shed 0.85 percent to 56,364 points.
Gold prices are down about 9 percent since mid-April, and on the day spot gold was down 0.36 percent.
Shares in gold producer Harmony Gold fell 4.16 percent to 21.20 rand, while Gold Fields closed 2.05 percent lower.
Platinum miners were also among the biggest decliners, with the spot price losing 1.76 percent.
Anglo American Platinum closed 4 percent lower to 355.64 rand, followed by Impala Platinum which fell 8.53 percent to 19.17 rand.
Reporting by Mfuneko Toyana and Nomvelo Chalumbira; Editing by Robin Pomeroy