The carry has come on the back of rand strength leading into the
African National Congress’ leadership election this weekend, with
traders betting Deputy President
Cyril Ramaphosa, a millionaire businessman, will take the mantle from
President
Jacob Zuma. Should that happen, more rand gains could follow, boosting
returns.
Even if Ramaphosa loses to
Nkosazana Dlamini-Zuma, the president’s ex-wife and his favoured
candidate, the rand could benefit in the longer run as bond yields shoot
up to levels where investors would find them hard to resist, according
to
Per Hammarlund, chief emerging-market strategist at SEB SE.
“I am optimistic about the carry of the rand,” Hammarlund said. “If
the worst comes to worst and yields go to 11% to 12%,
there will be plenty of rand buyers.”
A win for Ramaphosa could spark a rand rally to below 13 per dollar, a
level last seen in September, according to Rand Merchant Bank.
Victory
for Dlamini-Zuma, a former chair of the African Union Commission, could
see the currency test the record-weak level of 14.57 it posted last
year.
The rand gained over 3% to R13.0938/$ by close of trade in New York.
Yields on benchmark government bonds due December 2026
were little changed at 9.26%.
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