JOHANNESBURG, Nov 26 (Reuters) – South Africa’s rand firmed on Tuesday, defying a stronger U.S. dollar and a warning from the International Monetary Fund (IMF) about the country’s worsening fiscal position as investors continued to see value in the local currency’s real yield.
As of 0615 GMT, the rand ZAR=D3 was trading 0.2% firmer at 14.7550 per dollar. The currency came off a two-day losing streak that saw it spike to 14.7930 following S&P Global’s credit ratings review, which signalled the danger of low economic growth and rising debt.
Continued uncertainty over a trade agreement between China and the United States has also put the currency on the skids.
On Tuesday, investors saw a greater likelihood of a deal being agreed by the two leading economies by year-end, following a telephone call between top negotiators, news that lifted the greenback and the Chinese yuan.
A warning from the IMF that the country faced a prolonged period of weak growth if government did not implement promised reforms quickly, especially a turnaround of cash-strapped power utility Eskom, spooked the debt market while the rand held firm.
Traders said the currency’s resilience was down to the attractive yield due to relatively high interest rates after the central bank held fire on an expected cut last week despite inflation dipping to an eight-year trough.
Bonds continue to weaken, with the yield on the benchmark paper due in 2026 ZAR186= adding 1 basis point to the previous session’s 7.5 bps increase, trading at 8.475%.
(Reporting by Mfuneko Toyana, Editing by Sherry Jacob-Phillips)
((mfuneko.toyana@thomsonreuters.com; +27117753153; Reuters Messaging: mfuneko.toyana.thomsonreuters.com@reuters.net))
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