JOHANNESBURG, July 30 (Reuters) – South Africa’s rand on
Monday was little changed from last week’s close against the
dollar, but could be in for a volatile week if European policy
leaders fail to meet market expectations of a decisive move to
bring stability to the euro zone.
Government bonds eased slightly in early trade, with the
yield on the three-year and 14-year benchmarks
each notching up two basis points to 5.41 percent and
7.265 percent respectively.
The rand traded at 8.17 by 0630 GMT, just 0.17
percent off Friday’s close at 8.1560.
Earlier, the currency firmed slightly and bond yields ticked
up after Reserve Bank data showed growth in credit demand by the
private sector quickened to 8.72 percent year/year in June,
undermining the case for further interest rate cuts this year.
The Reserve Bank unexpectedly reduced rates by 50 basis
points to 5.0 percent earlier this month, citing concerns about
the effect of a global downturn on Africa’s largest economy.
But further interest rate cuts should not be taken as a
given and depend on growth and inflation trends in coming
months, central bank Governor Gill Marcus reiterated on
Saturday.
The market was cautiously optimistic, but nervous ahead of
the European Central Bank’s meeting on Thursday after bank chief
Mario Draghi said last week the bank it would do all it could to
save the euro zone.
Nagging debt problems in the bloc, a key trading partner for
South Africa, have spurred risk aversion in recent months.
“Get ready for another volatile week. If a bloodbath in
global markets is to be avoided, the ECB will have to deliver on
Thursday,” RMB said in a note.
“In this environment, don’t be surprised if dollar/rand
tests and breaks the lower or upper edge of the 8.07/12-8.55
rand, or even both.”
(Reporting by Stella Mapenzauswa; editing by David Dolan)
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