* Foreign accounts bought 2.5 bln rand in bonds last week
* PMI contracts for first time since December
JOHANNESBURG, July 2 (Reuters) – South Africa’s rand
steadied at a month high against the dollar on Monday,
underpinned by good flows into the local bond market during a
global risk rally that is propping up emerging markets.
Efforts taken by European leaders to stem the region’s debt
crisis on Thursday had cheered investors, who in turn now felt
they could buy into riskier assets such as the rand.
The local unit ended nearly unchanged from its
previous close, at 8.17 to the dollar at 1556 GMT compared to a
8.1640 end on Friday in New York. It hit a session high of 8.11,
a level last seen on May 14.
“There’s been a risk-on move in the rand from 8.40 to
8.10/12. That’s an example of what will happen if you can get
any positive news out of the euro,” said Jim Bryson, a rand
trader at Rand Merchant Bank.
“Any kind of stability in the market means we are suddenly
looked at as a high yielder and the rand does well, and when
there are problems in the world the rand suffers,” Bryson added.
The local unit is highly correlated with global risk
sentiment as a very liquid currency which investors use to hedge
emerging market risk. It is particularly vulnerable to euro
moves as the region is South Africa’s biggest trading bloc.
Increased flows into the bond market have supported rand
rallies in recent months.
Continued…
