Rand steadies off 10-week lowComment on this story
Johannesburg - South Africa's rand held steady against the dollar early on Wednesday, tracking the euro and finding support from investors who believed the local unit was oversold after three consecutive days of losses.
At 08:38 SA time the rand was trading at 10.7585 to the dollar, not far off a 10.7630 close in New York on Tuesday.
The rand hit a 10-week low in the previous session, pressured by negative global risk sentiment and a slew of disappointing local data.
However, the euro, the currency of South Africa's biggest trading bloc, eased on Wednesday on expectations the region's central bank would unveil measures to stave off deflation when it meets on Thursday.
Dealers also said the rand sell-off looked overdone, but did not rule out further losses if domestic fundamentals remained weak.
“Dollar/rand is getting increasingly stretched on the upside but local factors, poor data, increasing strike risks and a weaker global backdrop are still very supportive of further progress,” 4Cast analysts wrote in a market note.
Africa's most advanced economy is heading into strike season, an annual mid-year period of wage negotiations between workers and employers.
Investors worry that a crippling five-month strike in the platinum mines could set a precedent for the rest of the economy.
Nearly 500 members of South Africa's Nation Union of Mineworkers downed tools at building firm Group Five for higher wages and reduced hours on Tuesday.
However, Joseph Mathunjwa, head of the AMCU union that is leading the strike in the platinum sector, said on Wednesday the latest round of talks aimed at ending the strike “went well”, igniting hope that the work stoppage could be nearing to an end.
HSBC will release PMI data for May, which will give further clues about economic activity in the second quarter after GDP contracted in the first three months of they year, mainly because of the platinum mining strike.
Analysts expect the PMI, due at 09:15 SA time, to have remained just below the key 50 level that distinguishes improvement from deterioration in business activity.
Government bonds were slightly weaker, with the yields on the benchmark 2026 and the 2015 issues rising 1.5 basis points to 8.40 percent and 6.7 percent. - Reuters