South Africa’s rand is almost flat as the dollar and US yields are falling

A street money changer counts South African rand in Harare, Zimbabwe, May 5, 2016. REUTERS / Philimon Bulawayo

JOHANNESBURG (Reuters) – South Africa’s rand barely changed in early Thursday trading as weaker-than-expected US inflation data halted spikes in government bond and dollar yields.

At 0610 GMT, the rand was trading at 15.0925 against the dollar, not far from its previous close of 15.0850.

A broad emerging market sell-off earlier in the week, fueled by rising US yields, hit the currency hard.

Investors feared that the higher yields and faster economic recovery in the US could cause the Federal Reserve to cut its quantitative easing program and raise lending rates, weakening demand for riskier, high-yielding currencies like the rand.

However, Wednesday’s favorable US consumer price data and a decline in government bond yields led some investors to cut their bets on a rapid acceleration in inflation and weaken the dollar. [FRX]

Later in the day, the focus will be on January mining and production data, which will provide some insight into the performance of the domestic economy earlier in the year.

The economy saw its largest annual decline in seven decades in 2020, hampered by a strict lockdown to contain the spread of the coronavirus.

The South African Reserve Bank will be releasing checking account information for the fourth quarter of 2020 later in the day.

Government bonds strengthened in early deals, with the return on the benchmark instrument due in 2030 falling 4 basis points to 9.42%.

Reporting by Olivia Kumwenda-Mtambo; Editing by Rashmi Aich

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