Rand Rises to 5-Month High as South Africa Posts Trade Surplus

  • Currency gained after Zuma charges ruled to be wrongly dropped
  • Extension of Treasury head's contract seen as positive

The rand gained to its strongest level against the dollar in five months, advancing with emerging-market peers on reduced expectations of U.S. rate increases and after South Africa unexpectedly posted a trade surplus in March.

The rand advanced as much as 1.2 percent to 14.1152 per dollar, the strongest since Nov. 24 on a closing basis, and was at 14.2464 by 5:39 p.m. in Johannesburg. It was set for a third consecutive month of gains, along with other developing-country currencies.

The surplus was 2.9 billion rand ($205 million) in March, compared with a deficit of 1.1 billion rand the previous month, the revenue agency said Friday in the capital, Pretoria. The median estimate of economists in a Bloomberg survey was for a deficit of 1.9 billion rand. The rand strengthened earlier after the high court set aside a 2009 decision to drop corruption charges against Jacob Zuma, one month before he became president. The ruling may mean Zuma has to face more than 700 charges.

The MSCI Emerging Markets Currency Index rose to a 10-month high, supported by a “dovish” outcome from this week’s Federal Reserve meeting and reduced expectations of imminent U.S. interest-rate increases after weaker-than-expected growth and spending data, said Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg. South African markets, shut April 27 for a holiday, are heading into a long weekend.

“You have had a generalized rally in emerging-market currencies due to a weaker dollar on soggy U.S. data, carried through from a dovish Fed in a market where local players are mostly away,” said Nalla. He sees the 14.15-17 to the dollar area as key for opening up further gains for the rand toward the 14 level.

The trade data is “extremely positive for the rand” and has a longer-term impact as it reduces one of the pressures on the currency, said Ricardo da Camara, a market analyst at Johannesburg-based ETM Analytics (Pty) Ltd. The rand has traded stronger than its 200-day moving average against the dollar since April 18, a technically bullish sign, he said.

National Treasury Director General Lungisa Fuzile’s contract has been extended for two years, the South African government said Friday. The move reassured investors concerned that he may be removed from his post when his name was linked by local media reports to a list of senior Treasury officials who were to be replaced following Zuma’s sudden firing of former Finance Minister Nhlanhla Nene on Dec. 9.

Fuzile’s assignment will be positively received, Razia Khan, chief economist for Africa at Standard Chartered, was quoted as saying on News24. “The news helps to end uncertainty over the likelihood of imminent change at the Treasury,” Khan said.

The rand has advanced 9.2 percent this year, partially reversing a 25 percent loss in 2015. Yields on benchmark government bonds due December 2026 dropped 6 basis points to 8.98 percent.

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