JOHANNESBURG, Sept 3 (Reuters) – South Africa’s rand
steadied against the dollar on Monday, holding its own after
market bears failed in recent sessions to push it through the
psychologically key 8.5 level despite a weak global economic
outlook and prospects of lower commodity demand from China.
Sentiment towards South African assets was also on a better
footing after the government dropped controversial charges
against striking miners at Lonmin in the wake of violence which
left more than 40 people dead last month, raising the spectre of
political turmoil.
The rand was at 8.3980 against the dollar by 1615
GMT, up 0.07 percent from Friday’s close.
The currency was also buoyed by the latest purchasing
managers’ index which pointed to South Africa’s manufacturing
sector showing more resilience than global peers by staying in
expansionary territory despite slowing in August, said Murat
Toprak, EMEA strategist at HSBC.
“Also in the past few days you had expectations that dollar/
rand would move even higher towards 8.50/60 on the Chinese story
and the global slowdown but that hasn’t happened,” Toprak added.
“It’s not easy to hold a long dollar/rand position for a
long time and those investors have probably reduced their bets
on a (weaker) rand.”
Government bonds ended the day firmer and inversely the
yield for the heavily traded three year paper fell 6.5
basis points to 5.425 percent while that for the 14-year paper
shed 7 basis points to 7.36 percent.
“I reckon it’s mostly to do with the Fed’s comments on
Friday which have brought on risk-on trade,” a Johannesburg bond
dealer said.
He was referring to comments by U.S. Federal Reserve
Chairman Ben Bernanke which reinforced expectations for further
easing to revive growth in the world’s largest economy.
Expectations that interest rates in developed economies
will stay near zero levels for a long period have supported
higher-yielding emerging market assets, although this is usually
off-set by spikes in risk aversion.
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