Rand supported by G20 meeting

Johannesburg - The rand steadied against the dollar on Monday, with dealers looking for some gains on the currency after a G20 weekend meeting that urged eurozone leaders to soon resolve the debt crisis.

The crisis has cast a cloud on growth prospects for the world, including South Africa, Finance Minister Pravin Gordhan has said.

Partly due to the deepening euro crisis, the rand has been extremely volatile in the past two months and Gordhan has said the government is at a loss about how to stabilise it.

Gordhan and deputy Finance Minister Nhlanhla Nene are due to give speak several times this week, and market players are likely to listen closely. Gordhan’s first speech will be at at 11:45 GMT Monday.

The data calendar has inflation and retail sales data on Wednesday. Retail sales are expected to rise to 4.9% year-on-year for August, an outcome that will strengthen the view that rates are likely to remain on hold until next year.

Domestic stocks opened stronger, with the JSE’s Top 40 - (Tradeable) [JSE:J200] index rose 1% shortly after the 07:00 GMT start of trade.

The rand was trading at R7.82 to the dollar at 06:55 GMT, not far from Friday’s New York close of R7.8290.

“Given the generally more positive take from weekend developments around Europe, we look for a rand stronger this week,” Absa Capital said in a note.

The world’s leading economies pressed Europe on Saturday to act boldly within eight days to resolve the eurozone’s sovereign debt crisis.

The R7.80 level presents strong resistance for the rand. It has tried and failed to break it several times since its sharp fall to a 28-month low of R8.4950 on September 22.

Government bonds were a tad firmer, with the yield on the 2015 bond down 0.5 basis points to 6.695% and that on the 2026 issue down by the same margin to 8.38%.

If CPI comes in lower than forecasts of 5.6% year-on-year, it will be supportive of bonds, as it would back the case for another interest rate cut to add to 650 basis points worth of reductions in the two years to the end of 2010.