The Pound-to-Rand exchange rate advanced on Wednesday, building on an already handsome gain for the week as it lifted off from a likely range floor for the second quarter, as South African exchange rates softened alongside investors' appetite for risk assets including stocks and commodities.
The Rand showed reslience in the wake of earlier gains as finance minister Tito Mboweni set out a 2021 budget plan that appeared to be given a thumbs up by the currency market on Wednesday, before a bounce in the U.S. Dollar led South African exchange rates to soften.
The Rand outperformed on Tuesday with gains over many contemporaries even as developed world bond yields surged and global stocks came apart at the seams, although analysts say the recent 14.40-to-15.40 range is likely to dominate for USD/ZAR through Wednesday's budget.
The Rand was one in a small collection of emerging market currencies to fall against the Dollar on Friday although with a coronavirus vaccine rollout now underway in South Africa just as Treasury's tax take improves, there may be scope for it to sustainably conquer recent cycle highs in the coming weeks.
The brakes have been applied to the South African Rand's rally over recent hours, a development that will not surprise some market analysts and participants who are looking forward to next week's critical budget statement.
The South African Rand strengthened to its strongest level against the U.S. Dollar and approached a key marker against the Euro at the start of the new week, driven by a boost to investor sentiment that aided international interest in South African assets.
The Rand rallied Tuesday after President Cyril Ramaphosa eased 'lockdown' restrictions and as investors welcomed progress in Washington toward another a package, although imminent risks associated with the looming budget argue for caution while analysts say that upside should be limited in the short-term.
The Rand underperformed all major developed and emerging market rivals on Tuesday as the Dollar turned higher against a majority of its counterparts although concerns about the South African public finances and outlook for the country's credit rating have also been cited for nascent weakness.
The South African Rand was on the slide Thursday as the Dollar popped higher during North American trading and after the South African Reserve Bank (SARB) kept its monetary policy powder dry by keeping on the table the option of another interest rate cut at a later date.