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Rand softer, bonds flat

Jan 23 2013 09:29
Johannesburg - The rand remained under pressure against the dollar on Wednesday and bond yields looked set to trend higher as reports of violent protests added to uncertainty over the outlook for the struggling economy.

Consumer inflation data due at 10:00 is likely to  cement the market view that the Reserve Bank will leave interest rates unchanged on Thursday, especially if the data surprises above market expectations of a 5.7% year-on-year rise.

The rand was at R8.8850/$ at 09:00, slipping 0.34% from Tuesday's New York close at R8.8550.

Government bonds were little-changed from overnight levels, with the yield on the benchmark note due in 2026 flat at 7.255% and that for the 2015 bond adding one  basis point to 5.36%.

"Price action has been pretty poor with some offshore disinvestment, and with the currency lagging so are other asset classes. South Africa is definitely falling behind its emerging market peers right now," Citi bond trader Mark Southworth said.

"I'm not sure if we're going to have a real panic sell-off but it does look as if yields can drift a little bit higher today."

Foreign investors have been reluctant to buy strongly into local assets this year as Africa's biggest economy grapples with instability in the mining sector after violent strikes last year that hit economic growth.

Investors are now nervous that protests in the industrial town of Sasolburg, where residents have burnt vehicles, barricaded streets and looted shops, could signal a new wave of the unrest in townships over poor basic services.

"There is still potential for the rand to react negatively to headlines," said Standard Bank trader Warrick Butler, predicting a R8.82-90 range for the currency in Wednesday's session.

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rand  |  currencies  |  markets bonds



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