Johannesburg - The rand was slightly firmer against the
dollar on Wednesday after hitting one week lows in a wave of global risk
aversion and as a nervous market awaits the medium-term budget.
Government bonds recovered after a sharp sell-off on Tuesday
on speculation the Treasury might switch some short-term bonds for longer
maturities to delay its repayment obligations.
In his medium-term budget on Thursday, Finance Minister
Pravin Gordhan faces the hard task of balancing demands for increased social
spending from a restive population while reassuring investors and ratings
agencies he is committed to reining in the budget deficit.
By 06:48 GMT the rand traded 0.25% firmer at R8.7470 to the
dollar compared with Tuesday’s New York close at R8.7689.
The yields on the three-year and 14-year benchmark bonds
each gave up 1.5 basis points to 5.38% and 7.645% respectively. The 14-year
paper had closed 11 basis points higher on Tuesday.
In addition to worries about the struggling local economy,
the rand is vulnerable to risk aversion which pushed it 2% weaker on Tuesday as
investors sought the safety of US government bonds.
“We expect that a break of R8.80 may clear the path for a
test of the R9.00 level,” Rand Merchant Bank said in a note.