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Johannesburg - The rand gained 2% on the dollar on Wednesday, recovering from a 1-1/2 week low as risky
assets got a reprieve from heavy selling, which in turn gave longer government
debt a lift.
The rand firmed to 7.9500 against the dollar, compared with
Tuesday’s close of 8.1100, largely tracking moves in the euro, which traders
said was getting a breather while investors brace for the next EU debt crisis
developments.
Yields on government bonds dropped from one-week highs as the
rand’s strength drove some real money accounts to pick bonds up while the risk
rally was on.
“The most important reason right now is sentiment,” said Daniel
Sabiston of Absa Capital.
“When it appears that global risk markets may rally and the rand
improve, if you’re a buyer and have some cash to put to work you tend to do it
when the markets are more likely to rally and a day like today is one of those,”
Sabiston said.
However, volumes were thin as some investors chose to stay out of
the market until the European authorities come up with convincing plans to
control the debt crisis.
The yield on the 2015 bond fell four basis points to 6.60%
and the 2026 paper dropped 5.5 basis points to 8.37%.
The market only has the business confidence index due on Thursday
in terms of local data, which is expected to have continued its weaker trend in
October.
