UPDATE 1-South African rand firms to fresh 20-month high

(Updates prices as of 1512 GMT, adds trader’s comments in paragraphs 4, 6)

JOHANNESBURG, Sept 25 (Reuters) – South Africa’s rand extended its recent rally on Wednesday, strengthening to a fresh 20-month high against the dollar.

At 1512 GMT, the rand traded at 17.2075 against the U.S. currency, about 0.4% stronger than its previous close. It earlier hit 17.1350 per dollar, its strongest level since early February 2023.

Analysts have partly attributed the rand’s current strength to positive sentiment in the wake of interest rate cuts by the South African Reserve Bank and U.S. Federal Reserve last week.

“The momentum is likely to continue in favour of our local currency with there being little resistance until the R17/$ psychological level,” said Kavir Surujhlal, junior sales trader at IG Group.

China’s central bank on Tuesday unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back towards the government’s growth target.

The stimulus has bolstered emerging market currencies and a strong Chinese economy could create additional export opportunities for such countries, Surujhlal said.

Like other risk-sensitive currencies, the rand often takes cues from global drivers like policy changes in the world’s biggest economies. China is South Africa’s largest trading partner globally.

Earlier on Wednesday central bank data showed a composite leading business cycle indicator rose 0.7% month on month in July. The indicator reflects vehicle sales, business confidence, money supply and other factors in Africa’s most industrialised economy.

The Johannesburg Stock Exchange’s Top-40 index closed up about 1.5%, after touching a new high earlier in the session.

South Africa’s benchmark 2030 government bond was unchanged, with the yield at 8.845%. (Reporting by Bhargav Acharya and Tannur Anders; Additional reporting by Ankika Biswas in Bengaluru; Editing by Toby Chopra, Kirsten Donovan)

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