South Africa’s rand opened steady on Thursday but was seen putting in some gains as the dollar crept lower with talk of funds reversing yen-short and euro-short bets ahead of US data this week.
At 0645 GMT, the rand traded at 10.1050/dlr, a level orbited late on Wednesday. Dealers said it had completely shaken off the effects of the Soweto bombings, which briefly knocked it down to a nine-day low of 10,27/dlr in early Wednesday trade.
”We could retest 10,0/dlr today, the rand still looks good,” said one dealer at a major local bank. One of the best performing currencies of 2002, the rand briefly broke below 10,0/dlr on Tuesday for the first time in over three months. The rally has been fuelled by an appetite for the attractive yields offered by steep domestic interest rates.
Interest rates have been raised 400 basis points this year to counter spiralling inflation sparked by the rand’s steep plunge in 2001. ”The interest-rate differentials with other markets are still working in the rand’s favour,” said one dealer.
The market will keep an eye on trade data due out at 1200 GMT. A Reuters poll sees the country’s trade surplus in September narrowing to R3-billion from R3,85-billion in August.
Bonds gained as the market remained upbeat about the short-term interest rate outlook after the government said in its medium-term budget policy statement on Tuesday that it was relaxing its inflation target for 2004, taking pressure off the central bank to hike interest rates for a fifth time.
But some analysts have said that bonds are looking pricey at these levels and that gains could be limited. The yield on the short-dated R150 was down 4,5 basis points to 11,945% with a possible move to 11,88% seen, dealers said. The yield on the longer-dated R153 was down 6,5 basis points to 11,58%. – Reuters