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Johannesburg - The rand strengthened against the dollar in early Wednesday trade, buoyed by positive credit growth numbers from the central bank which reduced the chance of an interest rate cut in July.
However, after shedding about 600 points on Tuesday, the JSE All-share Index was trading 0.16% lower by 10:00 on Wednesday. All indices were trading slightly lower at the time, except for financial stocks which were up 0.05%.
This came after investors fled the US stock market on Tuesday, when the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of increasing alarm over the global economic outlook.
All but one stock in the S&P 500 ended lower as escalating doubts about the stability of Europe's banks roiled markets once again. The index closed at its lowest level since October 30, breaking its closing low for the year at 1 050.47 - another bearish signal for markets.
Ferdi Heyneke, a portfolio manager at Afrifocus, feels that while investors are looking for a reason to sell again, volatility remains in play and some bargain hunters may well buy into the dips. He noted that Dow futures are up slightly, but quickly added that Eastern markets are down and the euro and rand remain under pressure.
The rand traded at R7.66 against the dollar, 1.17% stronger than its previous New York close of R7.6850 on Tuesday.
"The rand has been holding up well despite the risk sell-off, probably due to the World Cup and the fact that we still have high yields," said a Johannesburg-based dealer.
"Today the market will be looking to buy dollars on dips towards that R7.60 level and R7.70 on the top side," he said.
Slight overnight strength by the euro also helped the South African unit, the trader said.
South African goverment bonds were also firmer, with the yield on the 2015 bond down one basis point at 8.09% and that on the 2036 edging down 0.5 basis points at 9.07%.
Trade numbers are due to be released later, with the account expected to show a deficit of R2.5bn versus a shortfall of R1.9bn in April.
- Reuters & I-Net Bridge
