South African rand gains ahead of election, rate decision

BY Reuters | ECONOMIC | 05/27/24 12:40 PM EDT

JOHANNESBURG, May 27 (Reuters) - The South Africa rand was stronger on Monday, supported by a weaker dollar, ahead of a week headlined by the national election and featuring an interest rate decision.

At 1430 GMT, the rand traded at 18.3300 against the dollar , about 0.5% stronger than its previous close.

The dollar last traded around 0.16% weaker against a basket of global currencies.

"The USD-ZAR is now, by and large, tracking broader USD moves," said Danny Greeff, co-head of Africa at ETM Analytics.

Global markets await U.S. inflation data this week which could give hints on the interest rate path of the world's biggest economy.

The risk-sensitive rand, like other emerging market currencies, often takes cues from global drivers, such as U.S. economic data.

South Africans will vote in national and provincial elections on Wednesday. Polls suggest the governing African National Congress could lose its parliamentary majority for the first time since the end of apartheid in 1994.

On Thursday, the South African Reserve Bank (SARB) will announce its latest monetary policy decision, a day after the election.

"There is still plenty of scope for volatility through the second half of the week, as the market will need to navigate a SARB policy update and digest exit polls closer to the weekend," Greeff said.

On the stock market, both the blue-chip Top-40 and the broader all-share indexes were down almost 0.3%.

South Africa's benchmark 2030 government bond was weaker, with the yield up 2.5 basis points to 10.560%.

(Reporting by Tannur Anders and Bhargav Acharya; Editing by Toby Chopra and Tomasz Janowski)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article