JOHANNESBURG, Sept 10 (Reuters) – South Africa’s rand hit a
one-month high against the dollar on Monday and government bonds
rallied on improving global risk sentiment.
The rand built on gains made last week when the
European Central Bank announced a bond buying programme that
eased fears of a break-up of the single currency.
It rose to a session high of 8.1300 to the dollar on Monday,
from a close of 8.1750 in New York on Friday.
Traders said the direction of the rand would depend on
events in Europe and the U.S. this week, including a ruling by
Germany’s constitutional court on the euro zone’s bailout fund
and the Federal Reserve’s policy meeting.
The rand follows the euro, the currency of its main trading
partner, closely.
A green light for the European Stability Mechanism and
another round of quantitative easing in the U.S., or QE3, is
expected to provide support for the rand.
“If Mr.Bernanke decides to go the whole hog with QE3 we’re
going to see a lot of cash continue to flood into emerging
markets,” said Warrick Butler, a currency trader at Standard
Bank. “If the Fed disappoints and postpones what’s likely to be
inevitable then we might see a bit of a risk spark again.”
The yield on the 2015 bond fell to a record low of
5.360 percent, while the 2026 paper was 17 basis
points lower at 7.285 percent, though traders said liquidity was
thin.
“The main thing we’re following is U.S. Treasuries,” said
Mark Southworth, a bond trader at Citi. “If they sell off so do
we. If they rally, so do we. We tend to follow the rallies more
aggressively than the selloffs.”
South Africa will sell a total of 2.1 billion rand in 2023
, 2041 and 2048 government bonds
in an auction on Tuesday that is expected to be well received.
(Reporting by Tosin Sulaiman; editing by Ron Askew)
© Thomson Reuters 2012 All rights reserved
