* Lingering caution to cap further rand gains
* Foreign demand boosts government bonds
JOHANNESBURG Jan 27 (Reuters) – South Africa’s rand
briefly touched new three-month highs versus the dollar on
Friday, but may have limited scope for further gains as nagging
fears about euro zone debt temper this week’s wave of improved
risk appetite for high-yield assets.
Government bonds tracked the rand, with foreigners buying
local debt, which offers higher yields than U.S. Treasuries.
By 1557 23 GMT the rand was at 7.7847 to the
dollar, up 0.5 percent from Thursday’s close. It touched a
session high of 7.7490 earlier, its strongest level against the
greenback since Oct. 31 last year.
But Friday’s gains were muted compared to the previous day,
when the rand jumped about 1.5 percent in a global rally spurred
by prospects of interest rates in the world’s biggest economy
staying near zero for some time.
This also supported local bonds, with the yield on the
highly liquid three year bond dipping 2.5 basis points
to 6.45 percent on Friday, while that for the longer-dated 2026
issue fell 8.5 basis points to 8.145 percent.
“A combination of a stronger rand and a lower interest rate
outlook in the United States have supported the local markets,”
ETM analyst Luke Barnett said.
“There’s definitely an improvement in market sentiment but
still a lot of caution. The rand will probably open at similar
levels on Monday.”
Continued…
