Johannesburg - The rand steadied against the dollar on
Thursday after rallying 1.5% overnight due to strong demand for local bonds by
foreign accounts, and could rally further on hopes of additional stimulus for
struggling leading economies.
The yield for the three-year paper was down two basis points
at 5.37% in early trade and that for the 14-year issue fell 4.5 basis points to
The rand briefly touched a session high of 8.3955/dollar,
close to Wednesday’s strongest level of R8.39, and was barely changed at
R8.4000 by 06:53 GMT.
“The rand has come off its recent weakest levels on the back
of some bond purchases and the euro has also rallied a bit,” a
Johannesburg-based trader said.
“You’re going to start to run into dollar support at these
levels under R8.40, but certainly if bonds and equities carry on performing
well then we should find some sellers again around R8.45/46.”
About R530m flowed into the local bond market from
non-resident accounts on Wednesday, stock market data showed.
The rand could also benefit from speculation that global
authorities might provide additional and coordinated stimulus measures to
counter dismal global growth and the deepening eurozone debt crisis, Absa
Capital said in a note.
“Given the concerns in many of the developed economies,
there is also a growing argument that investors could flock to emerging markets
for safety and if such decoupling did occur, the rand is likely to be one of the
biggest beneficiaries,” it said.
The rand tends to take the brunt of global market volatility
because South Africa’s markets are very liquid, making it easy for portfolio
investment to flow in and out rapidly.
The currency plunged to a three year low of R8.71/dollar in
early in June as investors fearing contagion from the eurozone dumped emerging
market assets traditionally perceived as carrying higher risk.