Rand comes under pressure

Johannesburg - The rand weakened against the dollar on Friday and is likely to remain under pressure as the Reserve Bank steps in to stem a strong rally this year by buying foreign exchange.

The rand, which lost more than 20% against the dollar last year, hit a five-month high of R7.52 this week but failed to break resistance at R7.50.

It was trading at R7.6630 to the dollar at 06:53 GMT, one percent weaker than Thursday's New York close of R7.5845.

“A retrace back to R7.77 in the short term could be on the cards after bulls repeatedly failed to breach R7.52 to the downside,” Absa Capital said in a note.

“Hence, we suspect that exporters will hold out for better levels to repatriate dollar earnings.”

There was muted reaction to President Jacob Zuma's pledge in a State of the Nation address late on Thursday to increase infrastructure spending in an effort to quicken job creation.

Further details of the investment spending will come out of the Finance Minister's Budget on February 22.

Government bonds mirrored the rand's weakness, and are likely remain under pressure ahead of the budget.

The focus will be on how Finance Minister Pravin Gordhan plans to keep spending in check.

The yield on the 2015 bond yield rose 3.5 basis points to 6.655% and that on the 2026 issue gained by the same margin to 8.32%.

Also weighing on the rand was the ongoing credit saga in Greece, with eurozone finance ministers demanding more economic reforms and assurances from Athens before approving a bailout that could avert a chaotic default.

Anisha Arora, an emerging market analyst at 4CAST, said a breach of the R7.50 rand/dollar barrier was unlikely without a definitive deal in Greece.