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Rand stretches gains with EMs back in favour

The currency rose in the face of data on Tuesday showing unemployment remained at an 11-year peak in the fourth quarter and manufacturing output for December shrank 5.9% year-on-year. Traders said weak growth was already priced in.

Picture: EWN

JOHANNESBURG - The rand extended its winning streak early on Wednesday, reaching its firmest in three sessions as a return of global demand for riskier assets offset more dismal local data.

At 0645 GMT, the rand was 0.3% firmer at R14.7800 per dollar from an overnight close of R14.8250 in New York.

The currency rose in the face of data on Tuesday showing unemployment remained at an 11-year peak in the fourth quarter and manufacturing output for December shrank 5.9% year-on-year. Traders said weak growth was already priced in.

“Traders seemed to shrug off some dismal domestic data yesterday as the dollar snapped its 6-day winning streak yesterday and global risk appetite showed signs of recovery, providing some reprieve for emerging market currencies,” said analysts at ETM.

Retail sales data are due at 1100 GMT. Mining output data will be released on Thursday before President Cyril Ramaphosa gives a speech opening Parliament. He is expected to give details on government plans for ailing power utility Eskom.

“With risks tilted to the downside for both of these data points, the likelihood of a technical recession in the second half of 2019 remains elevated,” ETM analysts wrote.

Bonds kicked off the session firmer, with the yield on the 2030 government issue down 1 basis point to 8.855%.