Rand holds its ground as emerging market peers feel the sell-off heat

JOHANNESBURG — After a jittery start to the week, the South African rand has emerged in much better shape than its emerging market peers. The likes of the Turkish lira have experienced heavy sell-offs this week while Poland’s zloty and Hungary’s forint have also borne the brunt. Interestingly, it’s optimism around the state of South Africa and better-than-expected inflation numbers that are holding the ZAR steady. Just imagine if we were still in the Zuptoid years – this week would have probably turned out far worse… – Gareth van Zyl

By Robert Brand

(Bloomberg) — Even as investors from Paul Krugman to Mark Mobius fretted about a meltdown across emerging markets in the wake of the Turkish lira’s tumble, one currency that many expected to catch the contagion first held firm: South Africa’s rand.

On a day when the lira plunged as much as 5.5 percent, dragging peers including the Polish zloty, Hungarian forint and Czech koruna with it, the rand was the second-best performing currency in the developing world. The rand advanced 0.3 percent for a third day of advances.

A collection of mixed denomination South African rand banknotes sit in an arranged photo in Johannesburg. Photographer: Waldo Swiegers/Bloomberg

With more than half of fixed-rate government debt in foreign hands, and liquid financial markets that make it easy to trade in and out of the rand, South Africa often bears the brunt of negative sentiment in emerging markets. During the so-called taper tantrum in 2013, the rand was among the worst-affected, losing 6 percent in a month.

On Wednesday, the currency took heart from consumer inflation data that showed price increases accelerating at a slower pace than economists’ estimates. It also seemed that a selloff of the country’s bonds by foreign investors may be easing: non-residents were net buyers of government securities on Tuesday for the first time in 13 days, according to Johannesburg Stock Exchange data.

The South Korean won was the best performer among emerging markets today, while Brazil’s real and Chile’s peso erased losses.