Johannesburg - The rand on Monday was little changed from
last week’s close against the dollar, but could be in for a volatile week if
European policy leaders fail to meet market expectations of a decisive move to
bring stability to the eurozone.
Government bonds eased slightly in early trade, with the
yield on the three-year and 14-year benchmarks
each notching up two basis points to 5.41% and 7.265% respectively.
The rand traded at R8.17 by 06:30 GMT, just 0.17% off
Friday’s close at R8.1560.
Earlier, the currency firmed slightly and bond yields ticked
up after Reserve Bank data showed growth in credit demand by the private sector
quickened to 8.72% year/year in June, undermining the case for further interest
rate cuts this year.
The Reserve Bank unexpectedly reduced rates by 50 basis
points to 5.0% earlier this month, citing concerns about the effect of a global
downturn on Africa’s largest economy.
But further interest rate cuts should not be taken as a
given and depend on growth and inflation trends in coming months, central bank
Governor Gill Marcus reiterated on Saturday.
The market was cautiously optimistic, but nervous ahead of
the European Central Bank’s meeting on Thursday after bank chief Mario Draghi
said last week the bank it would do all it could to save the eurozone.
Nagging debt problems in the bloc, a key trading partner for
South Africa, have spurred risk aversion in recent months.
“Get ready for another volatile week. If a bloodbath in
global markets is to be avoided, the ECB will have to deliver on Thursday,” RMB
said in a note.
“In this environment, don’t be surprised if dollar/rand
tests and breaks the lower or upper edge of the R8.07/12-R8.55, or even both.”