JOHANNESBURG: South Africa's rand stretched a recent rally into its fifth day on Thursday, defying technical and fundamental odds to trade at its firmest in over one month as Britain voted on its European Union status.
Stocks were flat, failing to find footing in the volatile global markets as investors cautiously eyed the outcome of the British vote.
By 1530 GMT the rand had firmed 0.96 percent to 14.4800 per dollar as overnight polls indicating Britons would vote to remain part of the economic bloc cheered risk appetite and dented the dollar.
The rand gained as much as 1.5 percent to a session high 14.3455, marching through key technical resistance around 14.40 that could see the unit gain further despite a shrinking economy and signs of a rebound by the greenback.
"In terms of the growth dynamics in South Africa and how they impact the currency, we tend to see a counter-intuitive reaction," said economist at ETM analytics Jana van Deventer, suggesting that a recession could boost the rand. Economic growth in the first quarter contracted 1.2 percent. "With growth so weak consumers are forced to retrench consumption and that in turn alleviates pressure on the import bill," van Deventer said.
"The trade and current account deficits then narrow and that lessens pressure on the rand."
Bonds edged weaker in the session, with the yield on the benchmark government paper due in 2026 adding 1 basis point to 8.88 percent.
On the bourse, the benchmark Top-40 index was little changed, down 0.05 percent to 47,453 points while the broader all-share gained 0.05 percent to 53,586 points.
"It's just general volatility until we can get through this particular situation (Brexit) because I think this is something that the market wants to have quite a bit of certainty about," Afrifocus Securities portfolio manager Ferdi Heyneke said.
Retailers Woolworths and Shoprite were some of the biggest gainers among the blue-chips, gaining 4.19 percent to 85 rand and 2.5 percent to 170 rand respectively.
Mobile network provider Vodacom rose 1.37 percent to 166.6 rand after the company reported a higher net profit for the year. Financial services providers Sanlam slipped 1.12 percent to 63 rand, while Old Mutual fell 1.4 percent to 42 rand, after rallying in the previous session.
Trade volumes were below average, with about 233 million shares changing hands compared to last year's daily average of 280 million shares.
Comments
Comments are closed.