Rand touch firmer after Spanish auction
Johannesburg - The rand was firmer against the
dollar in quiet midday trade on Thursday.
Dealers said the rand had
gained after the Spanish bond auction was viewed as successful, even
though the yield was higher than that of the previous auction.
"Trading today so far has been dead. We expected a successful
Spanish bond auction, as we believed that the European Central Bank
would be active to stop any surprises.
"Kicking the sovereign debt crisis
can down the road can only be maintained for so long, as that can is
looking pretty dented by now," a local trader said.
At noon local time the rand was bid at R7.8108 to the dollar
from its previous close of R7.8366 and Monday's close of R7.9368. It was
bid at R10.2628 to the euro from R10.2840 before, and at R12.5339
against sterling from R12.5562 previously.
The euro was bid at $1.3147 from its previous close of
$1.3122 after sinking to a two-month low of $1.2993 on Monday.
News emerged from Citigroup on Tuesday that SA government
bonds were entering a monitoring period for inclusion in their World
Government Bond Index (WGBI) in October.
This saw the rand and local
bonds rally significantly, with the currency appreciating 16 cents to
R7.82/dollar after the announcement and the bond curve strengthening 21
basis points in the benchmark R157, 25 basis points in the R186 and 27
basis points at the very long end.
The rand bounced off the R7.78 per dollar level resistance
level on Wednesday after the JSE released data showing that foreigners
bought a net R7.79bn of South African bonds including repo
transactions on Tuesday.
This was more than a third of the year to date
buying of R22.337bn of local bonds including repo transactions. In
2011 they bought R37.501bn of local bonds.
Spain's government was forced to pay investors more in a key
auction of 10-year bonds on Thursday, but managed to keep it below the
psychologically important 6% level.
The Spanish government paid a yield
of 5.743% in the auction of benchmark 10-year government bonds, compared
with 5.403% at the previous comparable auction on January 19.
The European Central Bank (ECB) has helped to bring down
yields on bonds of fragile eurozone nations by offering huge, cheap loans
to the region's banks, which in turn have snapped up sovereign bonds.
The ECB extended cheap, three-year loans of more than €1 trillion
to eurozone banks in two operations in December 2011 and February 2012
to avert a dangerous credit squeeze to the European banking system, after
American money market funds had withdrawn from European money markets
during the second half of last year.
Dow Jones Newswires reported the yen maintained its
downward trend against the dollar and euro on Thursday in Asia, amid
continuing expectations for further easing measures by the Bank of Japan
as the central bank's governor reaffirmed its commitment to easing to
meet its inflation goal.
The yen was also kept under pressure earlier in the day after
Xinhua News Agency reported that China would steadily boost interbank
liquidity through an increase in reverse repurchase agreements and cuts
in banks' reserve requirement ratios, among other measures.
cited an unnamed central bank official.