In early trading today, the South African rand showed strength, supported by a rebound in global precious metal prices and the currency’s attractiveness in carry trades. The rand was trading at around 17.5425 rand against the dollar, up 0.4% from Monday’s closing price.
ETM Analytics highlighted in a research note that rising domestic bond yields are expected to sustain the rand’s ability to attract capital inflows into its portfolio. The note also highlighted the importance of gold price performance relative to more benign oil prices to keep South Africa’s terms of trade favorable.
Gold prices are near all-time highs today, and platinum prices are also rising. These metals are important exports for South Africa and contribute to the strength of the rand.
However, not all economic indicators were positive. South Africa’s leading indicator of the business cycle fell by 0.7% in August, reversing the rise recorded in the previous month, central bank data showed. This comes amid mixed economic indicators, including a recent rise in business confidence following the formation of a coalition government in June and strong retail sales. On the contrary, sectors such as mining continue to face difficulties.
The rand move comes on the same day as the BRICS summit begins in Russia, which will also be attended by South African President Cyril Ramaphosa. President Ramaphosa is scheduled to hold bilateral talks with Russian President Vladimir Putin during the summit.
Reuters contributed to this article.
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