Johannesburg - South Africa's rand touched its strongest level in five weeks against the dollar on Monday amid speculation the US Federal Reserve could maintain an accommodative policy stance longer, boosting high-yielding emerging currencies.
Government bonds followed suit, with yields falling to six-week lows despite expectations South Africa's central bank will keep domestic interest rates on hold later this week.
The yield for the 2026 benchmark fell 8 basis points to 8.075 percent and that for the paper due in 2015 shed 6 basis points to 6.0 percent.
The rand was firmer at 9.7764 against the greenback by 11:08 SA time, its strongest since July 25.
The move largely reflected the dollar's losses against a basket of major currencies as investors bet the Federal Reserve will keep monetary policy loose for longer after Lawrence Summers, seen as fairly hawkish, pulled out from the race to be the bank's next chief.
But rand gains could be short-lived, with the Fed still expected to signal this week the start of a slowdown in its monthly $85 billion purchases which have injected cheap money into emerging markets.
“The news of Summers decision is unlikely to influence Wednesday's FOMC (Federal Open Market Committee) policy meeting at which we still expect the Fed to reduce its bond purchases by $15 billion,” Absa Capital said in a note to clients. - Reuters