Rand near 13-week high

Comment on this story
IOL world currency1 Graphic: Renjith Krishnan.

South Africa's rand hovered near the previous day's 13-week high against the dollar on Friday, riding on the remnants of emerging market euphoria over expectations of further policy easing in leading economies.

Government bonds weakened, with yields continuing their recent gradual trend higher after hitting historical lows in July when dovish central bank comments on the domestic economic and inflation outlook led the market to price in another rate cut.

The local currency clawed its way back from a session low of 8.17 against the greenback to 8.0850 by 18:09 SA time, just 0.1 percent softer than Thursday's close at 8.08.

But the rand, which has come back significantly from a three-year low of 8.71 in June, could run out of steam alongside other emerging market currencies recently buoyed by expectations of further stimulus measures from the European Central Bank and the US Federal Reserve.

“With nothing on the calendar in the way of likely global policy action for the month of August, investors may well decide to book profits on long EM currency positions, which could create a short term correction,” said Roderick Ngotho, EMEA forex strategist at RBS.

Government bonds sold off slightly on Friday, and the yield on the three-year benchmark ended the day three basis points higher at 5.635 percent while that for the longer-dated 14-year paper rose 2.5 basis points to 7.41 percent.

“I think this is a healthy profit taking after the strong rally we had in the last two months,” said Di Luo, an interest rate strategist at HSBC in London.

Local bonds hit record lows last month after the Reserve Bank unexpectedly cut rates after keeping them on hold for 19 months and left the door open for further loosening as economic growth remains lacklustre and inflation is seen sustainably within a 3-6 percent target band. - Reuters

sign up

Comment Guidelines

  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

  5. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles. You are only required to verify your email address once to have full access to commenting on articles. For more information please read our comment guidelines