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Johannesburg - The rand extended its gains against the dollar on Thursday as investors flocked to higher-risk assets in a positive response to an overnight deal on the eurozone debt crisis.
Higher-than-expected domestic PPI data earlier in the day also added to the rand’s gains but the main driver was the news out of Europe, which brought a sigh of relief from investors.
Government bonds tracked the rand firmer, extending this week’s gains that were prompted by a National Treasury plan not to borrow further to plug a budget deficit.
The rand advanced to a session high of R7.7040/$ its strongest since September 21. It was trading at R7.7090/$in early evening from Wednesday’s New York close of R7.9651/$.
The rand’s 3.5% gain on the day was its best performance in more than a month.
“After today’s massive move, it is likely to lose momentum over the next few days and pause a bit,” said Luke Barnett, analyst at ETM.
He cautioned against being overly-optimistic on the rand as the details of the eurozone deal have not been worked out yet but said that, in the long-term, fundamentals such as ultra-loose monetary policy favoured a stronger rand.
The rand has swung widely in recent few weeks, failing several times to shake off the weakness that started in September and saw it hit a 28-month low of R8.4950.
A convincing break of the R7.72 level might be tough but, once overcome, it could signal more aggressive gains towards R7.40, said Judy Padayachee, a technical analyst at Absa Capital.
The National Treasury has said it expects the rand to stabilise at stronger levels and would not use foreign exchange reserves to boost it.
Yields on government bonds were at multi-week lows, and could fall even more if the rand maintains its gains.
The yield on the 2015 bond was down 13.5 basis points to 6.54% after hitting 6.535%, its lowest since September 9. The yield on the 2026 issue fell 12 basis points to 8.23%, the lowest since September 19.
JSE follow globe higher
Higher-than-expected domestic PPI data earlier in the day also added to the rand’s gains but the main driver was the news out of Europe, which brought a sigh of relief from investors.
Government bonds tracked the rand firmer, extending this week’s gains that were prompted by a National Treasury plan not to borrow further to plug a budget deficit.
The rand advanced to a session high of R7.7040/$ its strongest since September 21. It was trading at R7.7090/$in early evening from Wednesday’s New York close of R7.9651/$.
The rand’s 3.5% gain on the day was its best performance in more than a month.
“After today’s massive move, it is likely to lose momentum over the next few days and pause a bit,” said Luke Barnett, analyst at ETM.
He cautioned against being overly-optimistic on the rand as the details of the eurozone deal have not been worked out yet but said that, in the long-term, fundamentals such as ultra-loose monetary policy favoured a stronger rand.
The rand has swung widely in recent few weeks, failing several times to shake off the weakness that started in September and saw it hit a 28-month low of R8.4950.
A convincing break of the R7.72 level might be tough but, once overcome, it could signal more aggressive gains towards R7.40, said Judy Padayachee, a technical analyst at Absa Capital.
The National Treasury has said it expects the rand to stabilise at stronger levels and would not use foreign exchange reserves to boost it.
Yields on government bonds were at multi-week lows, and could fall even more if the rand maintains its gains.
The yield on the 2015 bond was down 13.5 basis points to 6.54% after hitting 6.535%, its lowest since September 9. The yield on the 2026 issue fell 12 basis points to 8.23%, the lowest since September 19.
JSE follow globe higher
The JSE's blue-chip index surged to its highest level in nearly five months with miners adding the most points on rallying metal prices as
investors welcomed Europe’s plan to tackle its debt crisis.
The JSE Top 40 (Tradeable) [JSE:J200] blue-chip index jumped 2.54% to 29 159.47,
its highest closing level since June 1, 2011. The broader All Share [JSE:J203] index gained
2.26% to 32 452.55.
The stock market is on track for its biggest monthly gain since May
2009.
“We saw some encouraging GDP data in the US late in the sessionand that helped us push even further after the European leaders’ plan
yesterday,” said Xoli Mokoena, a trader at Global Trader.
