Rand claws back some lost ground, stocks to open lower

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February 10, 2016 4:18 PM

Stocks climbed as well, with the broad All-Share index up 0.2 percent and the blue-chip Top-40 flat.

South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg January 17, 2013. REUTERS/Siphiwe Sibeko

South Africa's rand recovered in early trade on Wednesday, with the dollar weakening as the global panic weighing on markets at the start of the week eased slightly, but investors awaited clues on policy outlook from the U.S. Federal Reserve chair.

The rand managed to claw back some lost ground on the back of a weaker dollar as worries over slowing global growth after the recent falls in oil and growing concerns about the health of European banks and China receded slightly.

The greenback hovered near a 3-1/2-month low set on Tuesday.

"Global sentiment is improving. Risk currencies have reflected the better mood, recovering slightly, with the rand also catching up its recent underperformance," Rand Merchant Bank currency strategist John Cairns said in a note.

At 0645 GMT the rand was 0.44 percent stronger at 16.0000 against the dollar, compared with its New York close on Tuesday.

Talks between President Jacob Zuma, Finance minister Pravin Gordhan and business leaders on Tuesday about the economy and the need to avoid a rating downgrade are shaping sentiment locally as the government tries to restore confidence in the battered economy.

Although this has not yet fed through strongly into the markets, Cairns said investors are now waiting to see if the government will really act on the proposals made by business leaders.

"The issue remains whether the government will walk the walk now that they have talked the talk. Having built up expectations, Zuma needs to keep the sentiment building in tomorrow's State of the Nation Address," said Cairns.

Risk events on Wednesday will be centred around Fed chair Janet Yellen's testimony before Congress.

Government bonds tracked the local currency, with the benchmark paper due in 2026 shedding 4.5 basis points at 9.290 percent.

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