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Rand firmer after US Fed holds lending rates

While the rand was boosted by the decision, its long term outlook remains shaky with recent economic indicators showing sluggish growth in the first quarter following nationwide power cuts and slack business and consumer confidence.

South African rand. Picture: Christa Eybers/EWN

JOHANNESBURG - The rand firmed on Thursday, boosted by the decision by the United States central bank to keep its benchmark lending rates unchanged, keeping demand for high yield currencies steady.

At 0630 GMT the rand was 0.16% firmer at R14.4300 per dollar, clawing back some of the ground it lost before Wednesday’s public holiday as investors waited for the 8 May elections.

The US Federal Reserve on Wednesday held interest rates steady and signaled little appetite to adjust them any time soon, spelling good news for emerging markets relying on elevated yield differentials with developed markets to lure investors.

While the rand was boosted by the decision, its long term outlook remains shaky with recent economic indicators showing sluggish growth in the first quarter following nationwide power cuts and slack business and consumer confidence.

The session sees the release of manufacturing activity and new vehicles sales data.

Sentiment, however, remains focused on general elections next week, with the vote set to be the most tightly contested since the end of apartheid 25 years ago and the ruling African National Congress’s large majority set to narrow on anger over unemployment and poverty.

Three polls this week showed the Cyril Ramaphosa-led ANC clinching a narrow majority, an outcome seen by many investors as key to the policy certainty necessary to reignite economic growth which has flatlined in the last decade.

Bonds weakened, with the yield on the benchmark 10-year government issue up 3.5 basis points to 8.585%.

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