The rand edged up against the dollar on Thursday, and a quickening in producer price inflation pointed to interest rates rising more this year, adding to positive sentiment on the currency.
The rand hit a session high of R10.3840/$ and was at R10.4000/$ by 15:34 GMT, gaining 0.57% from Wednesday’s close.
“The continued slide in core market yields has helped lend support to riskier emerging market currencies at the margin, seeing dollar-rand slide back under 10.5000,” Tradition Analytics said in a note.
The rand ticked higher after Statistics South Africa reported that headline producer inflation accelerated more than expected to 8.8% year-on-year in April from 8.2% in March.
The rand remains vulnerable to South African trade data due out on Friday, however, with analysts polled by Reuters seeing a wider deficit for April.
This would point to continued pressure on the current account, a long-standing source of weakness for the rand during episodes of global risk aversion.
“The large number of public holidays in April … along with further evidence of pressure on precious metal exports, thanks to the strike in the platinum sector, suggest another double-digit trade gap in the order of R12bn cannot be ruled out,” BNP Paribas Cadiz Securities analyst Jeffrey Schultz said.
“This could put renewed pressure on the rand.”
Government bonds rallied in tandem with the currency, pulling yields for the heavily traded 2026 and 2015 issues each 7 basis points lower to 8.185% and 6.565% respectively.