JOHANNESBURG (Reuters) – South Africa’s rand rebounded in early trade on Tuesday, after sinking to a two-month low in the previous session in a broad emerging market sell-off, as rising U.S. Treasury yields hurt appetite for riskier assets.
At 0640 GMT, the rand traded at 15.4700 against the dollar, 0.42% firmer than its previous close. The currency slipped to a two-month low of 15.5700 on Monday.
“The rand is a little stretched up here and we could see a pullback in the short term,” said Andre Cilliers, currency strategist at TreasuryONE, adding, the trading range for the day was likely to be 15.3500/15.5500.
Rising yields on long-term U.S. bonds, often a proxy for global lending rates, coupled with the passing of a large fiscal stimulus and improved economic data, have wreaked havoc on risk assets, with some investors seeing it as a precursor for tighter monetary policy.
Local focus is on the release of gross domestic product (GDP) data for the last quarter of 2020 at 0930 GMT.
South Africa’s GDP expanded by 66.1% quarter on quarter in the third quarter, and analysts polled by Reuters expect growth of 5% in the three months to Dec. 31.
Government bonds also firmed in early deals, with the yield on the instrument due in 2030 down 6 basis points to 9.500%.
Reporting by Olivia Kumwenda-Mtambo; Editing by Rashmi Aich