Johannesburg - South Africa's rand climbed as much as 1.2 percent against the dollar on Thursday before giving up all the gains in see-saw trading as dented prospects of policy easing in the US negated the lift that China's rate cut had given commodity currencies.
Government bonds edged higher after weak manufacturing and mining data pointed to sluggish domestic growth, supporting the case for an interest rate cut later this year.
The rand peaked at 8.2215 to the greenback, the strongest it has been since May 22, tracking a global rally in commodity currencies after China's central bank cut benchmark rates to support growth in the country, a key importer of South African minerals.
But the rand, buffeted to three-year lows last week as worries about the liquidity crunch in the euro zone dented global risk appetite, ran out of steam in late Thursday trade, falling back to 8.3220 by 15h59 GMT compared with Wednesday's close at 8.32.
“Strong support at 8.3000 limited dollar/rand downside in the morning session, but this gave way after the China easing gave a kick to risk appetite,” said Christopher Shiells, emerging markets analyst at Informa Global Markets.
“However, the rally was halted as Bernanke disappointed markets by not strongly signalling QE3, though I think expectations had been built up too much.”
Markets were left somewhat deflated after Federal Reserve Chairman Ben Bernanke said the US central bank was ready to shield the economy but offered few hints of stimulus by way of further quantitative easing.
South African government bonds closed firmer on the day, and yields fell, as weaker than expected factory data led some market players to price in lower domestic rates later this year.
The yields on the benchmark three-year and 14-year bonds each shed three basis points to 6.24 percent and 8.26 percent respectively. - Reuters