JOHANNESBURG, Sept 4 (Reuters) – South Africa’s rand
retreated from 1-1/2 week highs against the dollar on Tuesday as
euro zone worries hit riskier emerging market assets but
government bonds edged up ahead of their inclusion in
Citigroup’s World Government Bond Index next month.
The rand was affected by worries about liquidity problems in
the euro zone. which investors fear could spread if policymakers
fail to come up with concrete resolutions.
Europe is traditionally South Africa’s largest trading
partner bloc and the rand has tended to be susceptible to
swings in sentiment as policymakers grapple with debt problems
in that region.
The rand bounced off a session high of
8.3360/dollar, its strongest level since July 27, and was at
8.41 by 1630 GMT, down 0.3 percent on the day.
“We believe that the rand will remain on the back foot until
prospects for global economic growth and commodity prices
turn the corner,” said Bruce Donald, a strategist at Standard
Bank.
“However, there could be some near-term respite for the rand
should the European Central Bank announce a much-awaited bond
purchase programme this week.”
Foreign accounts are still overall attracted to local debt
though, partly due to the imminent inclusion in the WGBI, with
net inflows of nearly 5 billion rand seen during August,
according to data from the JSE exchange. Buying of government
bonds on Tuesday pushed yields to late July lows.
Demand was strong at the Treasury’s weekly auction for 2.1
billion rand ($249.97 million) worth of bonds, pushing yields
sharply lower compared to last week.
On the secondary market yields also fell, with the
three year paper easing four basis points to 5.385
percent while the 14-year paper was down 4.5 basis
points at 7.315 percent.
($1 = 8.4011 South African rand)
(Reporting by Stella Mapenzauswa; Editing by Susan Fenton)
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