Try our mobile app
(Adds latest figures, analyst comments)
JOHANNESBURG, June 3 (Reuters) - South Africa’s rand extended gains to a fresh 11-week high on Wednesday in a broad emerging market rally spurred by investor bets that a global economic recovery was taking hold after the coronavirus fallout.
The stock market mirrored the upbeat sentiment of the currency to scale a 13-week peak on Wednesday.
At 1515 GMT the rand was 1.64% firmer at 16.8900 per dollar, it best level since March 18, crossing the key 17.00 psychological threshold towards pre-coronavirus levels, having opened trade at 17.1400.
The day brought the local currency’s gains this week to around 4%, in-line with majority of emerging market currencies, with rising appetite for risk assets outweighing signs of an ailing local economy.
South Africa’s Purchasing Managers’ Index (PMI) contracted again in May, reaching a record low, as output and new sales collapsed during the nationwide coronavirus lockdown that began in March.
“Investors continued to buy into optimism over a potential global economic recovery, prompting a rotation out of safe-havens and into higher-yielding assets,” economists at ETM Analytics said in a note.
Governments and central banks around the world have unleashed unprecedented fiscal and monetary stimulus and other support for economies floored by the coronavirus pandemic.
The stimulus action has also overshadowed simmering tensions between Beijing and Washington over Hong Kong, and ongoing protests in the U.S. over recent police killings.
The FTSE/JSE top 40 companies index surged 2.03% to close the day’s trading at 49,300 points. The FTSE/JSE all share index closed up 2.19% to 53,645 points.
The market rally was led by the country’s banks which jumped on hopes that a faster economic recovery will boost loan growth in a low interest rate environment. The banking index was up 10.42%.
Bonds also firmed, with the yield on the 10-year instrument down 7 basis points to 8.665%. (Reporting by Mfuneko Toyana and Promit Mukherjee Editing by Alexandra Hudson)
