Rand seen firmer

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FiveRandCoin Reuters. A five rand coin.

Johannesburg - South Africa's rand was little changed in early trade on Thursday, with analysts saying it would likely to trade firmer, as hopes of more stimulus from the European Central Bank underpinned risk appetite.

At 08:38 SA time the rand was little changed against the dollar at 10.6125, from its close of 10.6100 in New York on Wednesday.

The currency firmed nearly 1 percent over the previous two sessions, supported by increased emerging market risk appetite and Tuesday's local data that showed the economy avoided slipping into recession.

“The hope of stimulus from the ECB has encouraged such risk-taking that the rand is rallying,” Rand Merchant Bank strategist John Cairns said in a note.

“The euro and the risk environment remain the dominant drivers of the rand,” he added.

However, sources told Reuters on Wednesday that the ECB is unlikely to take new policy action next week unless inflation figures on Friday show the euro zone sinking significantly towards deflation.

Statistics South Africa is due to release producer inflation data later on Thursday.

Economists expect the figure to slow to 7.9 percent in July versus 8.10 in the previous month, boding well for consumers as some producer costs tend to trickle to them.

The South African Reserve Bank expects consumer inflation that came in at 6.3 percent in July to return to its 3-6 percent target next year.

Yields on government bonds were flat at 6.540 percent on the 2015 note and 7.960 percent on the 2026 issue. - Reuters

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