Rand firmer as investors seek yield, gold shares lead bourse higher

Johannesbug-SA (July 9)  The rand climbed to its strongest in nearly a week against the dollar on Friday, boosted by a search for higher yield as investors bet that interest rates would stay depressed in leading economies.

Stocks put in modest gains in line with global peers, with the benchmark Top 40 index adding 0.26% to 44,920. While the wider All-share index ended 0.35% higher at 51,276.

The rand took in its stride a warning from Moody’s that South Africa was the most exposed in the sub-Saharan Africa region to market volatility linked to Britain’s decision to leave the European Union.

By 1545 GMT, the rand was trading 1.3% firmer at 14.5850 per dollar from an overnight close of 14.7800 in New York.

This was in spite of stronger-than-expected non-farm payrolls numbers out of the United States, which however left investors still unconvinced that the Federal Reserve would raise interest rates this year.

“Global markets still don’t believe that the U.S. is actually going to hike anything this year, so it’s still going to be very much a low interest environment globally,” Treasury One dealer Phillip Pearce said.

“So the whole game at the moment is just trying to seek yield.”

South African debt also ended the day higher as a result, with the yield for the 2026 benchmark shedding 6 basis points to 8.71%.

Bullion producer Gold Fields was among the gainers on the bourse, adding 3.17% to R81 after Goldman Sachs upgraded it to “Buy” from “Neutral”. It cited current gold/rand prices which it said should boost cash flows at South Deep, its last remaining South African mine.

Goldman Sachs also said it expected gold equities to generally outperform and said AngloGold Ashanti had “upside potential” as it saw “a likelihood of the company reinstating a dividend and/or revisiting the possibility of splitting its international and South African operations.”

AngloGold closed 1.6% higher at R298.47.

Spot gold has been putting in a strong run and has risen about 8% since Britain voted to quit the EU two weeks ago.

Trading volumes on the JSE securities exchange were however thin, with only around 172 million shares changing hands compared to last year’s average of 296 million.

Source: MineWeb