Johannesburg - South African government bonds and the rand
firmed on Wednesday after China’s central bank said it would continue buying
eurozone debt, encouraging investors to take on risky emerging market assets.
The rand, which is highly sensitive to eurozone sentiment,
was at R7.6850 to the dollar in early trade, 0.49% firmer than Tuesday’s New
York close of R7.7225. It may test the lower 7.60’s during the session, traders
said.
“The rand gained support from a stronger euro overnight and
stronger equity markets,” said David Gracey, a trader at Investec Securities.
“Basically that support came from comments by China that
they stand ready to support Europe, so there is a little bit of risk-on. We see
a range of R7.62 - R7.75,” he added.
China will continue to invest in eurozone government debt,
its central bank governor said, calling on Europeans to produce more attractive
investment products.
Tradition Analytics said the rand was resilient, despite
some weakness over the last week.
“The fact that it has failed to crack above levels of
R7.7800 yet again suggests that the notion of a weaker rand is not gaining
traction with all in the market.
“Technical analysis shows that a bull flag formation may be
building but any retreat back towards R7.6500 or below would simply reaffirm
the prospect that the medium- to longer-term bias on the dollar/rand is still
down.”
On the local front, December retail sales will be released
at 11:00 GMT. Growth is expected to slow to 6.5% year-on-year from 6.8% in
November, according to a Reuters survey.
On fixed income, the 2015 bond yield fell three basis points
to 6.58% and that on the 2026 note was down by the same margin to 8.255%.
Local stocks looked set for a positive start, with the
blue-chip Top 40 - (Tradeable) [JSE:J200] March futures contract up 0.6% before
the start of trade at 07:00 GMT.