JOHANNESBURG, Aug 12 (Reuters) - The South African rand extended its gains against the dollar on Wednesday, as political wrangling over a stimulus package for the U.S. economy halted the U.S. currency’s rebound.
At 1500 GMT, the rand was 0.73% firmer at 17.3675 per dollar, continuing its recovery after suffering steep losses in the past two weeks.
The rand has been under pressure from shifts in investor appetite for emerging market assets as well as weak economic data pointing to a deep recession in South Africa in 2020 due to the impact of the coronavirus pandemic and a slow recovery in 2021.
A survey showed on Wednesday that South African business confidence recovered from a 35-year low in July as global economic activity improved, but the measure remained below average.
“Due to the fragile economy, the currency remains vulnerable, especially if risk aversion rises again,” said Commerzbank’s emerging market analyst Elisabeth Andreae in a note.
“The downside risks to (the) rand include not only an unfavourable course of the pandemic with further (major) waves of infection, but also renewed fears of an emerging market crisis or an escalation in U.S.-Chinese relations.”
The Johannesburg Stock Exchange (JSE) rallied for a second day as markets ignored uncertainty over the U.S. stimulus package and focused on domestic events.
Higher commodity prices and increased business sentiment domestically helped the market to recoup most of its losses from earlier in the session. There were also reports in local media about a further reopening of the economy in South Africa, which gave a boost to the hospitality sector.
The FTSE/JSE All Share Index closed up 0.44% to 57,417 points while the Top 40 companies index went up 0.56% to end the day at 53,127 points.
Government bonds weakened, with the yield on the benchmark instrument due in 2030 adding 2 basis points to 9.3%.
Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee. Editing by Jane Merriman
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