The South African rand gained strength on Tuesday, trading at 17.5050 against the dollar, marking a 0.6% increase from its closing level on Monday. The uptick was fueled by higher global prices for precious metals, which are vital exports for South Africa, and the currency’s attractiveness for carry trades—where investors borrow in low-interest-rate countries to invest in those with higher rates.
ETM Analytics noted that the rise in domestic bond yields is expected to continue attracting portfolio inflows, further supporting the rand. Additionally, the performance of gold and platinum prices is a critical factor, with gold reaching an all-time high on Tuesday, while oil prices remained relatively subdued, enhancing South Africa’s terms of trade.
However, the central bank reported a 0.7% decline in the leading business cycle indicator for August, reversing the previous month’s increase. Despite a recent uptick in business confidence since the coalition government’s formation in June and strength in retail sales, other sectors like mining are still experiencing challenges.
Looking ahead, attention will shift to September’s inflation figures, with economists polled by Reuters anticipating a year-on-year inflation rate of 3.9%. Meanwhile, the Top-40 index on the stock market closed approximately 0.4% lower, reflecting broader market sentiments.
