{"id":417151,"date":"2020-07-16T14:45:03","date_gmt":"2020-07-16T12:45:03","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=417151"},"modified":"2020-07-16T14:45:03","modified_gmt":"2020-07-16T12:45:03","slug":"the-rand-is-on-its-way-up-and-its-caught-traders-by-surprise","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/417151\/the-rand-is-on-its-way-up-and-its-caught-traders-by-surprise\/","title":{"rendered":"The rand is on its way up – and it’s caught traders by surprise"},"content":{"rendered":"

Citigroup Inc. booked a loss of almost 5% in three weeks in a hypothetical trade betting against South Africa\u2019s rand. It may not be the only one, as the currency\u2019s advance to a four-month high catches many analysts by surprise.<\/p>\n

The rand has strengthened 5% this month, leading emerging-market peers amid a risk-on mood fuelled by central-bank stimulus, news of positive vaccine trials and a solid start to the U.S. earnings season.<\/p>\n

The weakening dollar is also pushing investors toward higher-yielding assets, Citi strategists led by Luis Costa said in a client note.<\/p>\n

\u201cFor the moment, short-term flows seem to have been pushed into carry positions once again,\u201d the strategists wrote. \u201cFurthermore, one cannot underestimate the effect of a very dysfunctional US political environment on the engineering of a temporarily weak broad dollar.\u201d<\/p>\n

Citi closed its long dollar-rand trade recommendation that it entered on 25 June at a spot rate of R17.4475 per dollar, with a total loss of 4.8%. The rand gained as much as 1.5% on Wednesday to R16.5089 per dollar, the highest on a closing basis since 13 March.<\/p>\n

\"\"<\/a><\/p>\n

While South Africa\u2019s fiscal fundamentals hardly inspire confidence, and the central bank is in a policy-easing cycle that\u2019s moved the benchmark repurchase rate to a record low, investors are attracted by the rand\u2019s relatively high yields and liquidity.<\/p>\n

The rand has returned 5.2% this month for investors who borrow dollars to buy higher-yielding assets, known as the carry trade.<\/p>\n

That\u2019s the most out of 23 major emerging markets monitored by Bloomberg. South African 10-year bonds yield 9.35%, the highest among major developing nations.<\/p>\n

Many analysts have not yet caught up with the rand\u2019s surge. The median forecast in a Bloomberg survey is for the rand to close out this quarter at 17.20 per dollar, which would imply a decline of around 4.2% by the end of September.<\/p>\n

The probability of the rand hitting that level this quarter is about 60%, according to Bloomberg calculations based on prices of options to buy and sell the currency.<\/p>\n

\n

Read: South Africans are running out of money \u2013 here\u2019s how many will struggle to survive a one month financial emergency<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Citigroup Inc. booked a loss of almost 5% in three weeks in a hypothetical trade betting against South Africa\u2019s rand. It may not be the only one, as the currency\u2019s advance to a four-month high catches many analysts by surprise.<\/p>\n","protected":false},"author":59,"featured_media":336533,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-417151","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/417151","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=417151"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/417151\/revisions"}],"predecessor-version":[{"id":417187,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/417151\/revisions\/417187"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/336533"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=417151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=417151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=417151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}