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Johannesburg - The rand gained against
the dollar on Thursday, taking its cue from a euro that hit multi-week highs on
German data that eased concerns about growth in the euro zone.
Government bonds extended losses, still smarting from supply
worries as the market was unconvinced that government’s narrower budget deficit
targets in Wednesday’s budget were realistic.
Bonds were off session lows though after softer than expected PPI
data that showed producer inflation slowed more than expected to 8.9 percent
year-on-year in January.
The rand hit a session high of 7.6640 to the dollar earlier, and
was last trading at 7.6912, 0.53 percent firmer than Wednesday’s New York close
of 7.7350.
“Dollar/rand has come down to the lower half of its 7.61-7.75 range
but the inability of euro/rand to follow this move indicates this it is a pure
euro/dollar driven adjustment,” said Gabor Ambrus, emerging market analyst at
4CAST.
The euro zone is South Africa’s largest trading partner and the
rand tends to follow the movements of the single currency.
The euro hit 10-week highs to the dollar earlier as German business
sentiment rose for the fourth month running in February, raising hopes that
Europe’s largest economy is improving and will avoid recession.
The rand ended largely steady to the euro at 10.2226 from a
previous close of 10.2429.
On the bond market, yields climbed further, with the 2015 yield up
six basis points to 6.675 percent and that on the 2026 issue was up 5.5 basis
points to 8.305 percent.
“It is still the effect of the budget speech. Issuance concerns and
CPI are weighing on sentiment,” Ambrus said.
Annual CPI inflation rose a touch more than expected to 6.3 percent
in January and is expected to stay outside the Reserve Bank’s 3-6 percent target
band throughout 2012, increasing the likelihood of a rate rise by year-end.
