Rand supported by risk appetite

Johannesburg - The rand firmed slightly against the dollar on Friday and looked set to test the psychologically important R8.00 level on the back of improved risk sentiment.

The rand hit five-week highs of R8.01 against the dollar on Thursday, helped by better-than-expected manufacturing production data, which bodes well for broader economic growth.

By 06:40 GMT it was trading at R8.0326, a touch firmer than Thursday’s New York close of R8.05.

The rand last attempted to break below the R8.00 level in December, after breaching it in mid-November.

“We are at the bottom of our recent ranges on the rand. It has downside potential but it would appear to be limited for the time being,” said Jim Bryson, chief dealer at RMB.

“If we get through R8.00, we can start to get stronger and I’d look for R7.90. But we do appear to be very euro dependent and euro/rand failed to get below R10.20 yesterday,” he said.

The rand lost momentum after hitting a four-month high of R10.1636 against the euro on Thursday and was last trading at R10.3290.

Government bonds were steady ahead of the year’s first inflation-linked bond auction. With inflation rising, appetite for the index-linked bonds has increased as investors seek hedges.

The yield on the 2015 bond was unchanged from the previous close at 6.73% and that on the 2026 issue fell 0.5 basis points to 8.525%.

The market is looking to a slew of data next week that includes purchasing managers' index numbers, which should give clues on whether the strength in manufacturing output seen in November could be sustained. Also on the horizon is the Reserve Bank’s monetary policy decision on Thursday.

Local stock futures suggested the bourse could open higher when trading starts at 07:00 GMT. The JSE’s Top 40 - (Tradeable) [JSE:J200] March futures contract was up 0.34% by 06:48 GMT.