Rand strengthens on surge of risk appetite

A surge in risk appetite has seen emerging market currencies, including the rand, firm on Thursday.

The local unit started the day at R14.82/$ and strengthen by as much as 0.60% to R14.72/$ by mid-morning. By noon it was trading around R14.73 to the greenback.

Andre Botha, senior dealer at TreasuryONE, said “heightened optimism” over a Brexit deal and news of a US stimulus deal, expected to be reached before Christmas, were among the contributing factors that saw “risk appetite surge and the dollar weaken”. Other factors include the US Federal Reserve’s announcement that interest rates will remain zero and the bond buying programme in the country will continue until the economy recovers, unemployment drops and a 2% inflation target is reached.

Botha believes that if the rand breaks below R14.70/$ there will be scope for it to strengthen further to R14.50/$.

The rand last week broke below the R15/$ mark for the first time in 10 months, and strengthened against other major currencies, the Bureau for Economic Research noted, earlier this week.

Among the supporting factors were stronger GDP figures as well as global developments related to the distribution of Covid-19 vaccines in the UK and a vaccine approval in the US.

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