The rand started Friday off on the front foot, adding to Thursday's 2% gain against the US dollar on good CPI data and healthy inflow in the bond market, as traders await President Cyril Ramaphosa's stimulus package.
The local unit added 0.5% to R14.21 to the US dollar in early tarde before retreating to the previous session's close of R14.28.
A weaker dollar hit by news from China about tariff and currency moves that could ease trade tensions, also buoyed the currency.
Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, said although the rand remains vulnerable to global risks, the economic stimulus package could assist it in the short term. Ramaphosa is expected to announce the stimulus package at 10:00.
Botes expects the range of trade to be between R14.18/$ and R14.45/$ for the rest of the day.
In a market update, RMB's head of markets research, Nema Ramkhelawan-Bhana shared views that a rand recovery could be possible if the market is “enthused” by Ramaphosa’s economic stimulus package.
“We’re by no means expecting miracles, as the government has effectively reprioritised existing funding to strategically important sectors to alleviate unemployment and accelerate productivity growth. But, it’s a step in the right direction,” Ramkhelawan-Bhana said.
“The president has stated that the measures would ‘secure confidence in sectors affected by regulatory uncertainty’ – which we can only take to mean that there will be pronouncements on the much-anticipated mining charter, which was approved by Cabinet on Wednesday.”
So far, the rand gains and those of emerging markets have been driven by the easing of trade tensions, fresh international equity gains and a subdued US dollar, she explained.
Analysts from NKC Economists said that apart from dollar weakness, the economic stimulus has had a role in the rand’s strength. NKC expects the rand to trade within a range of R14.20/$ and R14.50/$.
TreasuryONE senior dealer Andre Botha said that if the economic plan is positive, it could see the rand "carrying on with this momentum" and possibly strengthen to R14/$.
By 09:15 the local currency was trading 0.28% stronger at R14.24/$.
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