Rand extends gains, stocks open firmer

Johannesburg - The rand started the fourth quarter firmer against the dollar, drawing strength from overnight gains in emerging market currencies as well as slightly better-than-expected data out of China.

Stocks rallied in early trade along with Asian peers, rebounding strongly from a recent sell-off, with the Top 40 index opening 0.75% higher at 45 216 points.

Government bonds mirrored the local currency as yields fell across the curve, with the benchmark 2026 issue shedding 6.5 basis points at 8.395%.

By 10:41 the rand stood at R13.77/$.

"This strength was a function of a renewed risk-on environment which allowed the ZAR and other EM currencies to recover ground in relation to the USD," said Peter Worthington, an economist at Barclays.

Emerging market currencies took another breather after a bruising third quarter following a sharp sell-off of risky assets on concerns over the timing of a Federal Reserve interest rate hike and a slowdown in China's economy mounted.

Following Thursday morning's slightly better-than-expected China Purchasing Managers' Index, the rand regained momentum after closing R13.8550 in the previous session.

Further gains were capped by a significantly larger than expected R9.95bn domestic trade deficit driven by a 5.9% on a month-on-month basis contraction in exports.

"During the remainder of 2015, exports are likely to improve as production activity normalises, while the weakness of the rand will add support," said Busisiwe Radebe, an economist at Nedbank.