* Rand breaks through 8.30 overnight, 8.50 in line
* Gov’t resuscitates bond switching program
* July vehicle sales data at 0900 GMT
JOHANNESBURG, Aug 2 (Reuters) – The South African rand
firmed against the dollar on Thursday on hopes the European
Central Bank would announce further monetary stimulus to support
ailing euro zone economies at a policy meeting later in the
session.
However, investors were expected to tread carefully and not
take big positions ahead of the meeting.
The rand was up 0.26 percent to the dollar at
8.3280 by 0632 GMT, compared to its previous 8.3496 close in New
York on Wednesday. It shot through the 8.30 support barrier
after the U.S. Federal Reserve soured investor sentiment by not
announcing monetary easing on Wednesday.
“Globally, the focus is now on the ECB, with markets pricing
in some easing action, but there is the potential for
disappointment. So we expect players to remain cautious ahead of
the meeting,” said Christopher Shiells of Informa Global
Markets.
If the ECB does not deliver as expected, the rand is likely
to tumble to last week’s 8.50 levels. A positive outcome could
take the rand back to 8.15 and 8.11 resistance on the prospect
of cheap money flooding emerging markets.
Government bonds were weaker especially in the longer end in
anticipation of a switching auction where Treasury will swap 2.6
billion rand of paper maturing in two years for the
2026 issue.
Yields rose 4.5 basis points on the 2026 bond to 7.395 as
more paper was likely to go into that part of the yield curve.
The 2015 yield climbed 3.5 basis points to 5.555
percent. This will be the first switch auction since June 28.
July vehicle sales data is due at 0900 GMT and may deliver
some positive news to the market after recent numbers raised
worries about consumer spending.
(Reporting by Xola Potelwa)
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