JOHANNESBURG, July 26 (Reuters) – South Africa’s rand
steadied against the dollar on Thursday after rallying 1.5
percent overnight due to strong demand for local bonds by
foreign accounts, and could rally further on hopes of additional
stimulus for struggling leading economies.
The yield for the three-year paper was down two
basis points at 5.37 percent in early trade and that for the
14-year issue fell 4.5 basis points to 7.29 percent.
The rand briefly touched a session high of
8.3955/dollar, close to Wednesday’s strongest level of 8.39, and
was barely changed at 8.4000 by 0653 GMT.
“The rand has come off its recent weakest levels on the back
of some bond purchases and the euro has also rallied a bit,” a
Johannesburg-based trader said.
“You’re going to start to run into dollar support at these
levels under 8.40, but certainly if bonds and equities carry on
performing well then we should find some sellers again around
8.45/46.”
About 530 million rand flowed into the local bond market
from non-resident accounts on Wednesday, stock market data
showed.
The rand could also benefit from speculation that global
authorities might provide additional and coordinated stimulus
measures to counter dismal global growth and the deepening euro
zone debt crisis, Absa Capital said in a note.
“Given the concerns in many of the developed economies,
there is also a growing argument that investors could flock to
emerging markets for safety and if such decoupling did occur,
the rand is likely to be one of the biggest beneficiaries,” it
said.
The rand tends to take the brunt of global market volatility
because South Africa’s markets are very liquid, making it easy
for portfolio investment to flow in and out rapidly.
The currency plunged to a three year low of 8.71/dollar in
early in June as investors fearing contagion from the euro zone
dumped emerging market assets traditionally perceived as
carrying higher risk.
(Reporting by Stella Mapenzauswa; Editing by Ed Cropley)
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