Rand firmer but vulnerable to political risk, growth fears

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April 7, 2016 5:21 PM

At 0646 GMT, the rand traded at 15.0250 per dollar, 0.53 percent firmer from Wednesday's New York close.

A South African child holds a 50 rand note in a file photo.

South Africa's rand firmed slightly early on Thursday as investors bought into riskier but high-yielding assets, yet remained vulnerable to weak domestic growth outlook and political uncertainty.

Aiding risk sentiment were minutes from the latest U.S. Federal Reserve meeting that underscored caution about future interest rate hikes.

"The risk aversion that we spoke about yesterday has eased. The Fed and oil's bounce above $40/bbl have helped," Rand Merchant Bank analyst John Cairns said in a note.

On the local front, focus was on whether President Jacob Zuma would heed calls to step down after a top court ruled that he had breached the constitution by ignoring an order to repay some of the $16 million in state funds spent on renovating his private home.

Zuma survived impeachment in parliament on Tuesday thanks to the African National Congress' majority in the 400-seat assembly, but civil society organisations and opposition parties are still urging him to resign.

Ratings agency Standard & Poor's said on Wednesday political upheavals in South Africa pose a risk to its sovereign credit rating as the fallout could divert government's attention from implementing growth policies.

"The local unit has been unable to cling on below psychological R15/dollar level despite favourable currents within broader emerging market sphere due to country's weak economic fundamentals and rising political risk," NKC African Economics said in a note.

Stocks were set to open higher at 0700 GMT, with the JSE securities exchange's Top-40 futures index up almost 0.7 percent.

In fixed income, the yield for the benchmark instrument due in 2026 was down 5.5 basis points at 9.235 percent.

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