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Rand extends gains; Fed minutes awaited

With no major domestic data releases this week, the rand is likely to react to international news such as the release later on Wednesday of US Federal Reserve minutes from its most recent meeting.

Picture: EWN

JOHANNESBURG - The rand edged higher on Wednesday, extending the previous session’s gains on dollar weakness and optimism over a further easing of the country’s coronavirus lockdown.

With no major domestic data releases this week, the rand is likely to react to international news such as the release later on Wednesday of US Federal Reserve minutes from its most recent meeting.

At 1500 GMT, the rand traded at R17.1525 versus the dollar, 0.98% stronger than its previous close.

Domestic financial markets shrugged off the resumption of planned power cuts by state electricity utility Eskom after breakdowns at the utility’s coal-fired power stations.

Eskom’s struggles to are one of the main reasons why investors are cautious about the growth outlook for South Africa.

Commerzbank’s emerging market analyst Elisabeth Andreae said in a note that the power outages suggested that the road out of the coronavirus crisis was going to be long and rocky.

“That means the rand continues to depend on global factors for a further recovery, above all positive risk sentiment,” said Andreae.

In the stock market, trade tensions between the United States and China kept the pressure on market heavyweight Naspers while falling precious metal prices after a strong run kept resources companies in check.

Banks, which had been one of the worst-performing sectors since the March crash, showed some resilience.

The benchmark FTSE/JSE All Share index closed down 1.04% to 56,433 points, back to its end July levels. The FTSE/JSE Top 40 Companies index was down 1.14% to end the day at 52,138 points.

Government bonds weakened, as the yield on the 2030 bond rose 2.5 basis point to 9.315%.

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