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South African rand strengthens as Evergrande deal increases risk appetite

By on September 22, 2021 0

People chat outside a reception with an electronic board displaying the movements of major indices in the Johannesburg Stock Exchange building in Sandton Johannesburg, March 14, 2016. REUTERS / Siphiwe Sibeko / File Photo

JOHANNESBURG, Sept.22 (Reuters) – The South African rand strengthened on Wednesday as risk appetite improved after the China Evergrande group (3333.HK) pledged to issue an upcoming coupon bond, offering relief to nervous markets which were on the verge of worries of a potential debt crisis.

At 06:40 GMT, the rand was trading at 14.7500 against the dollar, 0.5% firmer than its previous close.

The currency had fallen to its lowest in more than three weeks as risk appetite weakened on Tuesday after rating agency Fitch said Africa’s most industrialized economy would continue to grapple with challenges as she seeks to stabilize her debt. Read more

Evergrande said on Wednesday it would pay a coupon on its domestic bonds on September 23, allaying fears that a default by China’s second-largest developer could spill over into the global financial system. Read more

Investor attention has now shifted to local consumer inflation data due at 0800 GMT and the US Federal Reserve, which is expected to drop more hints on interest rates and its future political trajectory.

Riskier currencies, such as the rand, thrive on US interest rates that remain low because they benefit from the interest rate differential that increases their attractiveness for what is known as the carry trade.

Reporting by Olivia Kumwenda-Mtambo, editing by Sherry Jacob-Phillips

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