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Johannesburg - The rand rallied through resistance levels
against the dollar early on Friday, as positive news out of the euro summit
propelled investors back into riskier assets after a week of nervousness.
The rand briefly got an extra boost after data showed
higher-than-expected growth in South Africa's credit and money supply. The
currency broke out of a week-long lethargy to rise as much as 1.5% against the
dollar to R8.2775, compared to a R8.4010 close overnight.
European leaders boosted markets by taking unexpected
decisions such as lowering Spanish and Italian borrowing costs.
Investors had cut their expectations that the European
summit would deliver any positive developments, making the announcements a much
needed boost for risk appetite.
Local dealers came into the session and sold off some
dollars. The rally extended to the session's high after central bank data
showed credit extended to the private grew by to 8.31% compared 7.33% in April,
beating market expectations of 8% growth.
"All of risk is much stronger overnight on the news out
of the European summit. We've seen a lot of unwinding of short risk positions
and long dollar positions and that's seen dollar/rand strengthen quite
aggressively," said Duncan Howes, a currency dealer at Absa Capital.
The nine-year bond extended gains to a record 7.23% and the
three-year issue was back to test a record high of 5.97% previously hit a week
ago.
Analysts said the foreign demand in local debt would
continue to support yields, but the bonds looked overstretched.
"We've seen very aggressive demand for our local bonds
which will help keep our currency better supported," said Howes, adding
that the local market was still driven by offshore developments and the rand
rally could be short term.
Market participants will also be focused on the close of an ANC conference this afternoon to get signals of what policies may be adopted by an elective conference in December.
