South Africa’s rand and bonds were a bit firmer in early Wednesday trade ahead of the start of the central bank’s scheduled two-day monetary policy meeting.
Activity was seen muted with many eyes expected to be diverted from trading screens to TV screens at 1130 GMT when South Africa plays a crucial World Cup soccer match against Spain. South Africa needs a draw to advance to the next round.
At 0605 GMT, the rand was trading at 10 against the dollar, two cents firmer on late Tuesday which saw its first close above the psychological 10/dollar level in two weeks.
A firmer gold price, which at $319,25 an ounce was well above its late London fix of $316,80, was seen helping, though jittery importers were seen capping gains between 9,95 and 10,0/dlr.
The rand has been the best performing currency in the world so far this year, gaining about 24% against the US unit and wiping out much of its historic 37% slide in 2001.
It has been buoyed by the weaker dollar, higher commodity prices and improved sentiment towards emerging market assets. Bond yields were lower but were not seen moving much ahead of the central bank’s monetary policy announcement, which could come later on Wednesday but is expected on Thursday.
”Yields seem to be down a bit on some short covering but I don’t expect any dramatic movement before the interest rate announcement,” said Barclays analyst Leon Myburgh.
The market has long priced in a widely expected 100 basis point rate hike, which would be the third of that size this year in the central bank’s drive to stem the inflationary impact of the rand’s slide last year.
Many analysts believe it will be the last hike this year and the market will keenly scrutinise the central bank’s statement for any clues to the future direction of monetary policy.
The yield on the most traded R150 bond due 2005 was down four basis points at 11,65% while the yield on the longer-dated R153 due 2010 was two basis points lower to 11,74%. – Reuters