* Rand could come under pressure from contagion fears
* Bond inflows should cushion rand somewhat
JOHANNESBURG Feb 2 (Reuters) – South Africa’s rand
hovered close to the previous day’s five-month highs against the
dollar on Thursday but could come under renewed pressure in
coming days as fears of global contagion from euro zone debt
problems, particularly in Greece, persist.
Improved risk appetite has lifted the rand by about five
percent against the greenback since the start of this after
tumbling nearly 23 percent last year as Europe’s debt woes drove
investors to traditional safe-haven assets, away from emerging
markets seen as carrying more risk.
By 1542 GMT the rand was at 7.6655 to the dollar,
just 0.13 percent off Wednesday’s close at 7.6555.
Market analysts said the currency’s current strong run,
which this week saw it reach its highest level since late
September last year, could soon run out of steam as the threat
of a default by Greece lingers.
“We think that the market also has to digest the likelihood
that even once and if the Greece situation is partly solved,
Portugal is standing in the wings to kind of take up that
place,” Bank of America Merrill Lynch analyst Matthew Sharratt
said.
“So there’s a lot of what we think could be negative news
coming from Europe in the weeks and months ahead. We expect to
see by the time we get to the second quarter more evidence of a
very weak global growth picture and that we think might be
negative for markets.”
The rand should however find some support from portfolio
flows into South African government bonds, which are offering
much higher returns compared with near-zero rates in developed
countries.
Continued…
