Lower oil prices are also supportive of South African bonds and the currency, with inflation expectations as measured by break-even rates falling to the lowest level in more than two months on Wednesday.
Key insights
- Weaker dollar post-midterms is benefiting emerging-market currencies, with MSCI’s gauge climbing for the first time in three days; as one of the most-traded currencies, the rand tends to lead gains or losses among developing-nation peers.
- The rand closed below its 100-day moving average on Tuesday for the first time since April; the last time it held below that level, in December, it marked the start of a two-month, 18 percent rally.
- Lower oil prices are improving South Africa’s inflation outlook. The five-year break-even rate – a gauge of investors’ expectations for average inflation over the period – dropped to 5.57 percent on Wednesday, the lowest since Aug. 28.
- Outflows from the country’s bond market appear to be losing momentum, with average daily net sales by foreign investors dropping to R369 million ($26 million), from as high as R1.77 billion in June.
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