The rand and government bonds surged in early trade on Monday as efforts to boost world growth bolstered risk appetite, with local shares seen following suit.
China unveiled a $600-billion economic stimulus package to help limit the fallout from a global financial crisis, while United States president-elect Barack Obama was pushing for more fiscal spending in the world’s biggest economy.
Finance ministers from the Group of 20 economic powers also called for more efforts to lift growth at a weekend meeting.
Asian shares and commodity prices jumped, boosting the rand and lifting stock futures, pointing to a strong start for the Johannesburg bourse at 7am GMT.
The rand was trading at 9,93 against the dollar at 6.40am GMT, 2,5% firmer than its close in New York on Friday, but off the session’s strongest level of 9,77.
”I think it is primarily driven by offshore markets, the stocks in Asian rallied quite dramatically … [and] we are tracking lock-step with international equities,” ABN AMRO dealer Paul Peter said.
He added liquidity had fallen sharply recently making for big trading ranges.
Domestic shares looked set to rise, with the blue chip Top-40 December futures contract last up 2,47%.
Government bonds continued their rally of the past three weeks, as investors begin to price in interest rate cuts.
The yield on the benchmark 2015 bond was down eight basis points compared to Friday’s close at 8,525%, while the 2036 yield dipped 10 basis points to 7,855%.
The yield on the two-year bond fell nine basis points to 8,995%.
”That’s [the rally] basically local guys and local funds saying that interest rate cuts will come down quicker and faster [than previously thought],” Peter said. – Reuters