May 6, 2020 / 8:11 AM / 24 days ago

South Africa's rand firmer as risk appetite nudges up

JOHANNESBURG, May 6 (Reuters) - South Africa’s rand firmed on Wednesday as it benefitted from improved risk demand but investors remained cautious with the outlook for the global and local economy still fragile amid the coronavirus crisis.

At 0715 GMT the rand was 0.7% firmer at 18.3950 per dollar, clawing its way back near Tuesday’s best of 18.3000.

The currency has strengthened in the past two sessions with other emerging market currencies, helped by the U.S. central bank’s $3 trillion asset-buying programme, which supported liquidity in riskier markets.

Appetite for risk and commodity assets has been helped as more nations ease lockdown restrictions and restart activity, although the boost has been tempered by the likelihood that any cure for the coronavirus might not come until 2021.

Drugmakers are rushing to develop treatments and vaccines for the coronavirus but the process of trials and approvals needed to bring them to the market, if they prove successful, is likely to take months.

The head of the South Africa’s revenue service has said tax collection could drop by as much as 20%, while private sector activity fell to a record low in April as businesses felt the pain of a lockdown now in its sixth week.

Bonds stretched a surprise rally that began at the end of April even though South Africa fell out of the World Government Bond Index after Moody’s became the last ratings firm to cut the country’s debt to subinvestment.

The yield on the government paper due in 2030 was down 8.5 basis points to 9.67% in early trading, its lowest since mid-March.

Stocks opened a touch higher, with the Johannesburg Stock Exchange’s Top-40 index up 0.36% to 45,371 points. (Reporting by Mfuneko Toyana; Editing by Edmund Blair)

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