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South Africa’s rand inches higher on easing risk aversion; inflation data in focus

PUBLISHED: Wed, 24 Mar 2021 07:28:36 GMT

JOHANNESBURG, March 24 (Reuters) – South Africa’s edged up against the dollar in early trade on Wednesday, benefiting from some easing risk aversion following a Turkish lira inspired rout in emerging market assets earlier this week, while investors awaited local inflation data release.

At 0650 GMT, the rand was 0.17% firmer against the dollar at 14.8500, compared to an overnight close of 14.8750.

Spillover from the Turkish lira’s sharp tumble at the beginning of the week after President Tayyip Erdogan fired his central bank governor hit demand for emerging market assets.

Increasing concerns over a third COVID-19 wave in Europe also dimmed risk appetite. But the rand found some takers as the consumer inflation data due later in the day and Thursday’s central bank decision on rates raised bets on higher rates.

A majority of analysts see the bank holding rates steady despite fellow emerging markets entering rate hiking cycles this year, although a small chance of preemptive hike by the Reserve Bank (SARB) has kept bulls and bears largely balanced.

“The local unit showed an uncharacteristically high degree of resilience,” said economists at ETM Analytics.

“This is primarily a function of SA’s positive current account dynamics, with strong commodity exports and weak import demand propping up the trade balance, while the high real yields SA offers also remain difficult to ignore.”

Bonds opened weaker, with the yield on the benchmark 2030 government issue up 5 basis points to 9.41%

(Reporting by Mfuneko Toyana; Editing by Rashmi Aich)

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