JOHANNESBURG, Sept 13 (Reuters) – The rand recovered from a
week low against the dollar in late Thursday trade as markets
were cheered by the U.S. Federal Reserve announcing a third
round of monetary easing.
The announcement kept rand bears at bay with the unit coming
back from one-week low levels the rand had traded at for most of
Thursday’s session as labour unrest in the mining sector knocked
sentiment towards Africa’s powerhouse.
The labour strife in South Africa’s platinum belt drove up
the cost of insuring against government debt default.
The rand was at 8.31 at 1700 GMT, recovering from
the day’s weakest level of 8.4450 and a one-week low hit earlier
in the session. The unit had plunged 3 percent in the previous
session as the festering mining dispute compounded worries about
poor economic data.
The 8.45 support level looked likely to hold back rand bears
although it was unclear how much support markets would get from
the U.S. Federal Reserve’s widely-expected announcement of a
third round of quantitative easing. Previous QE from the Fed has
boosted emerging market assets such as the rand.
“In the immediate term we do have question marks around
whether the currency can weaken much further given the move that
it has had, and also very importantly because we except the FOMC
to have a positive outcome for markets,” said Roderick Ngotho,
EM for e x strategist for RBS.
Government bonds were slightly weaker at 7.44 percent on the
14-year benchmark bond.
The cost of insuring South African debt for five years
rose to 145 basis points on Thursday from as
little as 123 the previous day.
“The strike action will have far-reaching consequences for
the country, from a lower GDP number to higher inflationary
pressures and worsening investor sentiment,” said Richard Farber
of Worldwide Capital.
“For a country which is reliant on foreign inflows, the
political and socio-economic outlook does not bode well for
these inflows to continue into perpetuity.”
(Reporting by Xola Potelwa; Editing by Ruth Pitchford)
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