JOHANNESBURG – The rand firmed against the dollar early on Wednesday, as plans to reopen a number of major economies that have been locked down to contain the COVID-19 pandemic boosted risk appetite.
At 0635 GMT, the rand traded at R18.5550 per dollar, 0.56% firmer than its previous close.
Sentiment improved as several states in the United States allowed businesses to reopen after a near-total halt in activity to contain the outbreak, while many other countries, such as Italy and Spain, plan to reopen their economies in the coming weeks.
In South Africa, President Cyril Ramaphosa last week announced a phased easing of lockdown restrictions from May 1, in addition to a R500 billion ($26.94 billion) stimulus package, giving some cheer to investors worried about the economy’s recovery prospects.
“The rand has thus far managed to consolidate at the recently improved levels; price action so far suggests a test of the technical support level around R18.4000,” analysts at Nedbank said in a note.
“Although there is likely to be some caution ahead of the WGBI (World Government Bond Index) tomorrow evening, the markets are currently trading with relative enthusiasm for riskier assets.”
South Africa will fall out of the benchmark WGBI at the end of April after Moody’s revoked the country’s last investment grade rating in March.
The rebalancing will probably lead to a further sell-off in South African bonds.
The yield on the 10-year government bond due in 2030 was down 4 basis points to 10.740% in early trade.
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