Rand hits two-year high against the dollar as it continues strong run

The South African rand rallied to its highest level in more than two years against the dollar on Wednesday, as the local currency continued its strong run on the back of a sustained rebound in global economies and positive US Treasury data.

The local currency was trading at R13,54 at 09h00 on Thursday (3 June), its highest position against the greenback since early February 2019.

“With the local economy remaining weak and facing power cuts, the rand’s recent rally has been mainly on the back of global factors, including higher commodity prices which benefit resource-rich South Africa and expectations US lending rates will stay lower for longer,” Reuters reported.

“Riskier currencies, such as the rand, thrive on U.S. interest rates remaining low because they benefit from the interest rate differential that increases their appeal for carry trade.”

The quickening in global growth will see positive knock-on effects for South Africa, said Investec chief economist Annabel Bishop.

“Incoming data indicates 2021 will likely see an economic outcome somewhat higher, at 3.9% y/y, than the previously expected (3.2% y/y) as global recovery and the marked strength of commodity prices benefits South Africa’s exports, with other areas in South Africa’s GDP also gaining traction.

“The global recovery has spurred rapid growth in commodity prices, both on expectations of future demand, and on strengthening industrial activity, as many purchasing managers indexes (PMIs) approach or exceed previous highs globally, although there is also significant evidence of stronger cost pressures.”

The rand was trading at the following levels against the major currencies at 09h00 on Thursday (3 June):

  • Dollar/Rand: R13.54 (+0.21%)
  • Pound/Rand: R19.17 (+0.11%)
  • Euro/Rand: R16.51 (+0.05%)

Read: Warning for taxpayers in South Africa

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Rand hits two-year high against the dollar as it continues strong run