The South African rand eased slightly in early trading on Thursday, pausing after two straight sessions of gains driven by a softer U.S. dollar. At 06:41 GMT, the rand was trading at 17.56 to the dollar, about 0.3% weaker than its close on Wednesday.
The local currency had strengthened by more than 1% over the past two days after weaker U.S. inflation data boosted investor expectations that the U.S. Federal Reserve could cut interest rates as early as September. The softer dollar has been a key driver for the rand’s recent performance, alongside firm commodity prices and improved market sentiment.
“Had it not been for the wave of USD selling due to the shifting expectations towards more rate cuts, the ZAR would not have performed as it has,” analysts at ETM Analytics said in a research note.
The note added that Bitcoin’s surge to fresh record highs, strong performance in global stock markets, and buoyant commodity prices have all supported the rand against the weakening greenback. South Africa, a major exporter of gold, platinum, and other minerals, tends to benefit when global commodity prices rise.
With no major local economic data scheduled for release this week, market watchers expect the rand to be influenced mainly by global developments, including U.S. economic indicators, shifts in investor appetite for riskier assets, and movements in commodity markets.
In the bond market, South Africa’s benchmark 2035 government bond was steady in early trade, with the yield slipping half a basis point to 9.605%. Analysts say the bond market has remained relatively stable as investors weigh global interest rate expectations and domestic fiscal concerns.
Traders will be watching upcoming U.S. economic data closely for signs that could reinforce or weaken the case for a September interest rate cut. A continued dovish outlook from the Fed could support further rand gains, while any shift towards a more hawkish stance could put renewed pressure on the currency.
