/ 6 January 2012

Rand recoups losses ahead of Lagarde’s SA visit

South Africa’s rand recovered some strength against the dollar on Friday but remained vulnerable to the frequent spurts of global risk aversion that pushed it to two-week lows the day before as the eurozone debt crisis persists.

The global impact of the crisis was likely to feature during Finance Minister Pravin Gordhan’s meeting on Friday morning with visiting International Monetary Fund chief director Christine Lagarde.

Gordhan has bemoaned what he called “a serious lack of global solidarity” in finding a solution to the debt crisis, which has triggered volatile portfolio flows in and out of emerging markets like South Africa.

In early Friday trade, the rand appeared to hold its own despite a sharply weaker euro, trading 0.18% firmer at 8.1750 to the dollar by 6.50am GMT, compared with Thursday’s close at 8.19.

“It looks like there’s still some exporter interest around keeping the rand [supported],” Bidvest Bank chief dealer Ion de Vleeschauwer said.

“Maybe people are saying the South African fundamentals are not that bad and the strong co-relation that we’ve had with the euro since the European crisis hit the market may be dissipating somewhat.”

But he cautioned that strong trading links with Europe meant the rand was still vulnerable in the long-term to “any sort of warble” in that region’s common currency.

South African government bonds retreated on Friday, and inversely the yield on the benchmark 2015 issue added 1.5 basis points to 6.865% while that for the 2026 paper was up 2.5 basis points at 8.66%. — Reuters