Rand softer as post-MPC rally peters out

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February 2, 2016 10:07 AM

Stocks were set to open mostly flat at 0700 GMT, with the JSE securities exchange's Top-40 futures index adding just 0.17 percent.

South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko

South Africa's rand looked wobbly against the dollar on Tuesday, with most of the euphoria brought on by the central bank's hiking of interest rates last week giving way to renewed worries over the global economic outlook.

At 0642 GMT the rand was down 0.32 percent at 15.9800 per dollar compared with Monday's close.

The local unit had rallied to as high as 15.8500 on Monday, it strongest in more than three weeks, after the South African Reserve Bank (SARB) raised the benchmark lending rate by 50 basis points last Thursday to try and curb inflation.

Analysts said the rand-positive impact of the hike, as well as the Bank of Japan's rate cut which boosted high-yielding assets, had largely worn off.

"Wall Street has set the tone, closing sideways, with gains restricted by the renewed fall in the oil price," Rand Merchant Bank analyst John Cairns said.

"Rand outperformance on last week's SARB hike has also ceased, leaving the local unit to reflect the global malaise."

In fixed income, however, government bonds held their ground, with the yield for the instrument maturing in 2026 down 5.5 basis points at 9.29 percent.

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