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Rand recovers slightly after selloff

At 1532 GMT, the rand traded at 17.0910 per dollar, 0.5% firmer than its close on Thursday, when it fell more than 3% on a brutal day for global markets.

Picture: EWN.

JOHANNESBURG - The South African rand recovered slightly on Friday as investors returned to riskier assets following a steep selloff a day earlier.

At 1532 GMT, the rand traded at 17.0910 per dollar, 0.5% firmer than its close on Thursday, when it fell more than 3% on a brutal day for global markets.

Thursday’s decline was a sharp reversal for a currency that had notched up gains of more than 11% since the start of May.

But analysts at Capital Economics said they did not expect the recovery in risky assets to be over, citing unprecedented support from central banks and saying the worst for the world economy could have passed.

“Third, the valuations of most risky assets are currently not high in our view,” they said in a research note.

Investors in South African assets have tended to overlook a grim domestic economic outlook in recent weeks, focusing on government measures to cushion the blow from COVID-19 and the attractive yields of local government debt over worrying fiscal metrics or recent credit rating downgrades.

Africa’s most industrialised economy was already in recession before COVID-19 struck.

Local stocks also gained on Friday, with the Johannesburg bourse’s All-share Index rising around 0.7%, its first day of gains this week. The Top-40 index rose a similar amount.

In fixed income, the yield on the 2030 government bond rose 6.5 basis points to 9.23%.