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Rand recovers after drop

Jun 24 2011 09:17 Reuters

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Johannesburg - The rand regained some of its footing against the dollar on Friday after falling to one-week lows the day before, while government bonds climbed higher due to foreigners seeking high returns.

Yields pulled back from Thursday's three-day highs, with the the four-year issue (ZAR157) giving up 5.5 basis points to 7.44% while that on the 2026 bond fell six basis points to 8.555%.

Data from the JSE securities exchange showed foreigners picked up a net R1.7bn of South African bonds in standard trade on Thursday.

"This is surprising, given that we expected to see outflows on account of the risk-off trade that has played out in the past two trading sessions," Tradition Analytics said in a note.

"That foreigners were prepared to buy South African bonds despite the risk-off scenario is interesting and potentially good news in promoting rand stability."

The inflows to the debt market helped boost the local currency, which touched a session high of R6.8125 against the dollar in early Friday trade after tumbling to R6.8875 the day before on global risk aversion.   

By 08:45 the rand was at R6.8490 to the greenback, barely changed from Thursday's close at R6.8425.

Traders said the rand was likely to find support at the R6.87 level which had triggered dollar-selling by exporters in the previous session. In the same vein, the unit should struggle to pierce R6.80.

The local share market looked set to open in positive territory after a heavy sell-off in the previous session.

The September futures contract was up 1.03% prior to the 09:00 start of trade.
bonds  |  rand
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