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Rand firms ahead of PPI data

Johannesburg - The rand firmed on Thursday but stayed slightly shy of a three-month high hit in the previous session, while government bonds weakened with the longer end of the curve under pressure due to uncertainty about US efforts to curb its national debt.

Investors are unsure how US debt talks will end, causing general nervousness, although the political impasse is for the time being seen as hurting the dollar more than emerging market assets.

The local market is expecting producer price inflation numbers at 11:30. The numbers will be keenly watched for clues as to the trend in inflation.

Consensus is for annual PPI to have steadied at 6.9% in June but notch up a month-on-month jump to 3.9% from 0.4% previously due to electricity price increases.

Meanwhile, South Africa's annual strike season is moving up a gear, with tens of thousands gold miners expected to down tools, potentially costing the gold mining sector $25m a day in lost output.

The rand was up 0.37% at R6.6570 to the dollar by 08:49, compared to a New York close of R6.6820. The currency firmed to a 12-week high of R6.6285 in the previous session but met resistance at R6.63, where it previously bounced from in May.

Bonds weakened, with the spread between the 2015 and 2026 bonds touching a four month-high of 116 basis points as the uncertainty of investors globally caused some to sell longer-dated debt.

Investors, especially foreigners, continue to buy local bonds even amid the uncertainly but are wary of holding long-dated paper until markets settle.

"The spread in the last week or so has been widening. If you're uncomfortable with the bond market you tend to try and buy shorter-dated rather than longer-dated bonds," said a bond trader based in Johannesburg.

"There's a lot of uncertainty, and so there are sellers of the 2026 and buyers of 2015," he added.

Yields were up 1.5 basis points to 7.375% on the 2015 note and climbed 2.5 basis points to 8.525% on the 2026 paper.

The Johannesburg stock market opened in the red, with the blue-chip Top 40 - (Tradeable) [JSE:J200] index down around 1% in early trade.
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Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
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Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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