Johannesburg - The rand advanced to the strongest level against the dollar in three weeks to pare a third straight month of losses after South Africa’s central bank ramped up the magnitude of interest-rate increases.
The currency strengthened 0.7 percent to 16.0899 per dollar by 10.12am in Johannesburg, the highest level on a closing basis since January 7. That marked a second day of gains after the Reserve Bank lifted the benchmark rate by half a percentage point to 6.75 percent on Thursday, diverging from its gradual approach of tightening in moves of 25 basis points at a time.
Yields on government bonds due December 2026 declined 9 basis points to 9.39 percent, the lowest level since December 21.
Reserve Bank Governor Lesetja Kganyago and Finance Minister Pravin Gordhan have taken on the task of restoring confidence in an economy hit by a series of missteps by President Jacob Zuma last year, the risk of credit-rating downgrades to junk and plunging commodity prices.
Demand for riskier assets also improved as the Bank of Japan adopted a negative interest rate policy on Friday while maintaining its record asset-purchase plan, days after the Federal Reserve indicated it would raise US borrowing costs gradually.
BLOOMBERG