Rand seen treading water

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NewRandMoney Reuters.

Johannesburg - South Africa's rand was expected to stay in ranges against the dollar on Friday, taking its cue mainly from global market developments in the absence of market-moving domestic news.

Traders said a fairly run-of-the-mill “state of the nation” speech to parliament overnight by President Jacob Zuma had failed to influence local financial markets.

Government bonds edged higher after the previous day's losses, with the yield for the 2026 benchmark shaving off 1.5 basis points to 8.75 percent and the 2015 bond dipping half a basis point to 7.16 percent.

The rand was at 11.0200 to the dollar at 09:12 SA time, down 0.46 percent from Thursday's close.

The rand has under-performed against most of its emerging market peers this year due to wide fiscal and current account deficits which make it particularly vulnerable during bouts of global risk aversion.

Market players said the local unit could on Friday track fellow emerging market struggler the Turkish lira, which remained vulnerable after the country reported a wider current account deficit on Thursday.

Both countries are among the so-called “fragile five” emerging market economies seen most vulnerable to a reduction of US monetary stimulus which has been a key source of portfolio flows into the region.

“Fragile five concerns have yet to abate, as reflected in Turkey's current account data yesterday,” Tradition Analytics said in a note.

“A more gradual narrowing of South Africa's current account deficit will help take the edge off the bearish rand outlook but not fully dissolve its structural fragility.” - Reuters

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