THE rand extended gains against the dollar at midday on Wednesday, after US Federal Reserve chairwoman Janet Yellen’s market-friendly speech and a deal between Greece and its creditors removed the need to take cover in the dollar.
The rand gains came ahead of the much-anticipated local budget speech, where investors will wait to hear how Finance Minister Nhlanhla Nene plans to raise revenue to fill the government’s funding gap.
At 12.18pm the rand was at R11.4325 to the dollar from a close of R11.4916 on Tuesday. The local unit firmed as far as R11.40 to the greenback in mid-morning trade.
Against the euro, the rand traded at R12.9886 from a previous close of R13.0231 and was at R17.7174 to the pound from R17.7510 previously.
At her semi-annual testimony to congress on Tuesday night, Ms Yellen signalled that while the Fed was preparing for a rate rise this year, such a move would not come before June. That as cyclical weakness in the US labour market, slowing inflation and uncertainty over China and Europe continued to threaten growth in the world’s largest economy.
Prior to last night’s speech, analysts had bet the Fed would start hiking US interest rates at about the middle of the year, but these predictions have since been extended.
On Tuesday, Greece struck a deal with its eurozone creditors to extend its current bail-out package by four months, removing fears Athens would not have enough money to pay its bills and potentially be forced out of the eurozone.
"The two potential international risk events for markets had positive outcomes," Ric Spooner, chief market analyst at CMC Markets, told Dow Jones newswires.
"Janet Yellen’s testimony moved expectations for a rate hike out in time while the boxes were ticked to cement a four-month funding programme for Greece," he said.
The euro was also firmer against the dollar, trading at $1.1367 from $1.1339 on Tuesday night.
Mr Nene will deliver his first budget speech since taking the post at 2pm.
Investors will be on the look out for details of the government’s fiscal consolidation plans and tax increases.
