JOHANNESBURG (Reuters) -The South African rand was stronger on Tuesday, supported by global precious metals prices and the appeal of carry trades.
At 1502 GMT, the rand was trading at 17.5050 against the dollar, 0.6% stronger than Monday’s closing level.
Carry trades involve investors borrowing money in countries with low interest rates and putting the money in countries with higher interest rates.
ETM Analytics said in a research note that a rise in domestic bond yields should ensure the rand retains its ability to attract portfolio inflows.
“Another factor worth considering is the performance of the gold price… versus an oil price that remains more subdued, to ensure South Africa’s trading conditions remain supportive,” it added.
Gold hit a record high on Tuesday, while platinum also rose. These precious metals are important South African export products.
Early on Tuesday, central bank data showed a leading cyclical indicator fell 0.7% in August, wiping out the previous month’s gain.
While business confidence in South Africa has increased since the formation of a coalition government in June and retail sales have recently strengthened, other sectors such as mining remain in a slump.
On Wednesday, attention will turn to September’s inflation figures. Economists polled by Reuters expect annual inflation of 3.9% last month.
On the stock market, the Top 40 index closed about 0.4% lower.
South Africa’s 2030 government bond was stronger, with yields down 2 basis points to 9.325%.
