Filomena Scalise

Johannesburg - The rand held its ground against the dollar in thin Tuesday trade, with steady foreign flows into government bonds ahead of their inclusion in a key global index in October seen supporting local assets in coming weeks.

The currency and debt markets took this week's violence between rival unions at platinum producer Lonmin in their stride, although sentiment could turn negative if clashes spread to other mines.

By 16h55 GMT the rand was at 8.1685/dollar, barely changed from Monday's close at 8.1640.

With little on the local calendar to drive markets, the focus was still mainly on the global arena where hopes of policy easing to help struggling leading economies has triggered carry trades in favour of high-yielding emerging market assets.

“Over the short term, we would not be surprised to see the rand enjoying some buoyancy into hopes in global markets for decisive action from the big central banks,” Standard Bank strategists Bruce Donald and Varushka Singh said in a note.

“The rand should receive more support in the coming weeks from World Government Bond Index related flows.”

Data shows foreign accounts have bought more than R50-billion worth of local bonds since Citigroup announced it would include South African debt into the index, tracked by many fund managers.

Bonds however weakened on Tuesday, partly due to the National Treasury injecting R2.1-billion of new paper at its weekly primary auction.

The yield on the three-year benchmark edged up a basis point to 5.68 percent while that for the 14-year issue was up four basis points at 7.49 percent. - Reuters