The South African rand extended gains on Monday, building from the previous week, as investor sentiment towards Africa’s most industrialised economy improved.

At 16:19, the rand traded at R18.55 to the dollar.

The dollar was slightly weaker – trading at 103.450 against a basket of global currencies.

The recent strengthening of the rand can be attributed to several factors, including a decrease in power cuts and speculation surrounding the potential relocation of the Brics summit from Johannesburg. This speculation arises from an arrest warrant issued by the International Criminal Court against Russian President Vladimir Putin.

Kieran Siney, an analyst at ETM Analytics, highlighted the improved relations between South Africa and the West regarding Russian affairs as another positive influence on investor sentiment.

President Cyril Ramaphosa is expected to embark on a peace mission to Russia and Ukraine, aiming to resolve the ongoing war. This initiative is seen as an opportunity for foreign investors to regain confidence in South Africa, despite their involvement in the initial sell-off.

After experiencing a decline of around 7% in May, the rand has recovered more than 6% in June. Additionally, South Africa’s dollar-denominated bonds have exhibited a strong performance this month, with the 2044 maturity recording the highest level since early April, according to Tradeweb data.

Razia Khan, Chief Africa Economist at Standard Chartered, attributed the recent rand appreciation to significant progress in reducing power cuts, also known as load shedding.

Furthermore, the expectation that the US Federal Reserve might conclude its tightening cycle has contributed to the positive outlook for South African Eurobonds, as expressed by Kieran Siney of ETM Analytics.

This week’s policy meetings of the US Federal Reserve, the European Central Bank, and the Bank of Japan are anticipated to shape market sentiment, with investors eagerly seeking insights into future interest rate trajectories.

The Johannesburg Stock Exchange’s blue-chip Top 40 index closed almost 0.5% higher than its previous session, while South Africa’s benchmark 2030 government bond exhibited strength, leading to a 6-basis-point decline in its yield, which now stands at 10.760%.