* Rand to stay under pressure, in line with euro
* Bond yields dip as domestic credit growth slows
JOHANNESBURG May 30 (Reuters) – South Africa’s rand eased
against the dollar in early Wednesday trade and is likely to
stay on the back foot as fears of contagion from Europe’s
liquidity problems dent investors’ appetite for higher yielding
but riskier emerging market assets.
Government bonds were up slightly in early trade, with
yields retreating after Reserve Bank data showed growth in
private sector credit demand braked more than expected in April.
The rand was at 8.3422 against the dollar by 0645 GMT, down
0.27 percent from Tuesday’s close at 8.32.
The ongoing financial troubles in the euro zone, with which
South Africa trades heavily, were likely to keep the rand under
pressure, Tradition Analytics said.
The euro fell to a two-year low, hurt by worries about
Spain’s soaring borrowing costs and expectations more money may
be needed to support its ailing banks.
“Europe is far from being fixed and until we see major signs
of either true reform or papered over reform the rand is likely
to struggle to make much headway,” Tradition Analytics said.
On the debt market, the yield on the three year paper
shed half a basis point to 6.385 percent compared with
Tuesday’s close while that for the 14-year issue was
flat at 8.345 percent.
Yields pulled back slightly after Reserve Bank data showed
credit demand by the private sector braked more than expected to
7.33 percent year-on-year in April compared with a 9.16 percent
rise in March, backing the argument for further interest rate
cuts to stimulate economic activity.
Rates are already at 30-year lows after a monetary loosening
cycle that ended in November 2010.
(Reporting by Stella Mapenzauswa; Editing by Ed Cropley)
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