* Rand retreats in line with euro
* Yields down as bonds hold to gains
JOHANNESBURG Dec 21 (Reuters) – The rand reversed its
earlier gains against the dollar on Wednesday as wary investors
lost their appetite for risky assets on nagging worries about
debt constraints in the euro zone, South Africa’s main trading
partner.
Government bonds however closed firmer and yields fell, with
the bond exchange’s yearend shorter trading hours shielding the
local debt market from the currency’s losses.
The rand gained as much as 1.6 percent against the
dollar earlier in the session to a seven-day high of 8.07 but
wiped out those gains to trade at 8.25 by 1550 GMT, down 0.62
percent from Tuesday’s close at 8.1990.
The move mirrored that of the euro, which fell against the
dollar after larger-than-expected bank demand for cheap European
Central Bank loans failed to convince investors the move would
ease Europe’s deep-seated debt problems.
“It was a knee-jerk reaction that dollar/rand rebounded
after euro/dollar plunged … As long as the euro is under
selling pressure among the thin markets, dollar/rand could test
intraday highs,” said Anisha Arora, an emerging market analyst
at 4CAST.
Bonds did not feel the impact of the rand sell-off on
Wednesday, with the heavily-traded four-year and
15-year bonds holding firm until the market closed at
midday Johannesburg time.
The yield on the four-year issue was down 10 basis points on
the day at 6.79 percent while that for the longer-dated paper
dropped eight basis points to 8.555 percent.
“My expectation will be that bonds will open up modestly
weaker tomorrow given that the currency has given up some of its
gains,” Absa Capital bond trader Daniel Sabiston said.
(Reporting by Stella Mapenzauswa; editing by Ron Askew)
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