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#RandReport: Rand gains, but pressure seen ahead of cbank decision

Higher interest rates may boost the rand’s yield appeal but policy tightening likely to add pressure.

Picture: Christa Eybers/EWN

JOHANNESBURG - South Africa's rand reversed earlier losses against the dollar on Tuesday, taking its cue mainly from global markets, but analysts said it would stay under pressure ahead of Thursday's domestic monetary policy decision.

Stocks ended a see-saw session slightly higher, with Sasol among the top gainers as crude oil prices rebounded on hopes of a deal to tackle a global supply glut.

At 1645 GMT the rand was up one percent at 16.3600 per dollar, after briefly scaling 16.3510 earlier, its strongest since 8 January according to Reuters data.

Traders and analysts are factoring in an interest rate hike when the central bank's monetary policy committee (MPC) concludes its meeting on Thursday, although forecasts are divided between a 25 and a 50 basis point increase.

Although higher interest rates will in theory boost the rand's yield appeal, policy tightening is likely to add pressure on the economy, which has failed to grow above two percent since a 2008/09 recession.

"The rand is likely to struggle ahead of the MPC meeting," analysts at Standard Bank said.

"The 16.4000 level has proved strong support for dollar/rand over the past two weeks and we believe that this is likely to remain the case into Thursday afternoon."

On the local bourse, Sasol, which makes fuel from coal and gas but sells it at the same price as firms that import and refine crude oil, surged 3.3 percent to R401.89.

The Organization of the Petroleum Exporting Countries (Opec) is making renewed calls for rival producers to cut supply alongside its members.

The blue-chip JSE Top-40 index added 0.5 percent to 42,625 and the broader All-share index gained 0.68 percent to 47,532.

Mining shares also gained as metal prices cruised higher, with Anglo American Platinum rising 12.2 percent to R209.31 and rival Impala Platinum up 6.2 percent to R26.56.

Government debt edged higher during the session, and the yield on paper due in 2026 dipped two basis points to close at 9.655 percent.