/ 18 April 2002

Rand regains some ground, sticks in range

Johannesburg | Wednesday

SOUTH Africa’s rand regained some lost ground on Wednesday but remained firmly stuck in its latest range of 11,25-11,15 to the dollar, the levels it needs to break to make significant moves in either direction.

At 0930 GMT, the rand traded at 11,2050 to the dollar, off a morning low of 11,2525 and just a bit off its late Johannesburg level on Tuesday of 11,19.

Aside from its brief break above 11,25 last night and this morning, it has been trapped between 11,15 and 11,25 for more than a week now, with two-way commercial flows cancelling each other out.

”There still seems to be guys who want to sell dollars at 11,25/26, but if it firms towards 11,20, then the importers want to buy dollars,” said a London-based trader with a big South African bank.

The currency has recovered by about 18% from a record low of 13,85 against the dollar in late December and an official inquiry into its dramatic slide last year has helped it find some stability, analysts say.

Bond yields crept up slightly after the yield curve flattened further on Tuesday as investors sought longer-dated maturities on expectations that interest rates would rise in the near-term.

At 0930 GMT, the yield on the most-traded R150 bond, due 2005, was bid at 12,34%, two basis points up from late Tuesday trade in Johannesburg.

The yield on the longer-dated R153 bond, due 2010, was up five basis points at 12.62%.

The yield spread between the two, which is now 28 basis points, has narrowed from 55 basis points a month ago as longer-dated maturities come into favour because short-term interest rates are seen climbing.

The central bank has twice raised interest rates by 100 basis points this year to stem the inflationary pressures of the rand’s 37% slide against the dollar last year.

Dealers said they do not expect yields to move far in either direction until the release of producer price data for March next Wednesday.

South Africa’s main consumer inflation indicators all rose more strongly than expected in the year to March, official data showed on Tuesday, making further interest rates hikes this year look inevitable. – Reuters