Rand recovers from 2009 lows

Graphic: renjith krishnan

Graphic: renjith krishnan

Published Mar 15, 2013

Share

Johannesburg - The rand pulled back from 4-year lows against the dollar for the first day this week on Friday after positive production data saw investors cover short rand positions and as a rally in the US currency paused for breath.

The rand hit a fresh four-year low on Thursday but then cut those losses after local mining and manufacturing data showed a surprising improvement from last year.

However analysts say demand is unlikely to be maintained at such strong levels for the rest of the year as the local and global economies struggle to grow.

Widespread concerns about South Africa's yawning current account deficit are expected to exert continual pressure on the currency.

By 08:47 SA time on Friday, the rand was steady at 9.1630/dollar.

“A reversal in dollar gains has brought some relief to USD/ZAR,” said John Cairns of Rand Merchant Bank. “US data out this afternoon creates some risks but there's no reason to think the market will close the week much changed from current levels, even if we see a wide range on the day.”

Inflation and industrial production data are some of the key numbers due to be released by the world's biggest economy later in the session.

Investors will also keep an eye out for any signs that illegal work stoppages in the domestic coal mining sector are spreading.

Production at Anglo American's Kleinkopje coal mine stopped for a day during an illegal strike on Wednesday. Miners also staged walk-outs at five Exxaro mines earlier in the month.

South Africa generates about 85 percent of its electricity from coal, with Anglo and Exxaro providing most of state-owned power utility Eskom's coal supply.

Dealers expect any pressure on electricity supply to take the rand back to 4-year lows.

Government bond prices rose with the improved sentiment on the rand.

The yield on the benchmark 2026 issue dropped 2.5 basis points to 7.405 percent.

Treasury is looking to place 800 million rand of inflation-linked paper at 11:00 SA time.

The 2025, 2038 and 2050 CPI-linked bonds are up for auction, with dealers anticipating strong demand for the shorter-dated paper because of demand from the secondary market. - Reuters

Related Topics: