/ 26 September 2011

Rand claws its way up after crazy day at the market

The rand ended firmer against the dollar after a volatile session on Monday, as investors came back to emerging markets, encouraged by efforts to curb the European debt crisis.

However, with investors unsure about where to put their money until decisive action is taken about the euro zone debt crisis, riskier assets like the South African currency are likely to remain volatile and susceptible to global developments this week.

Bond prices were firmer with yields closing at 7.06% on the four-year note and 8.58% on the 2026 bond.

The rand hit a session low of R8.3470 to the dollar in morning trade and has fluctuated between bought and sold while following global developments with moves exaggerated by thin liquidity.

At 6pm, the rand was trading at R8.0875 to the dollar, 0.4% firmer than its previous close in New York.

It briefly dipped below the psychologically key R8 level to 7.9510 earlier in the session as the market was encouraged by comments from the euro region about sorting out it debt problems.

Investors who have stayed away because of the uncertainty are now slowly getting back to buying South African assets, an emerging markets analyst said.

“Traders are just getting back into South African assets after the sharp falls seen recently, covering some shorts in case the euro zone comes up with a cure-all for the debt crisis,” said Christopher Shiells, emerging markets analyst at IGM.

“The news [on Europe] has been taken positively and that’s why rand got down to a low of R7.95 to the dollar and equity markets have rebounded a little,” a Johannesburg-based dealer said.

“The rand is very volatile, the global picture has not got any better and I think that there is a lot of scepticism on global events and global markets at the moment,” the dealer said.

Dealers are watching for sustained closes around the R8 area to see if the rand will gain further, however as the global growth picture has not changed, the currency is more likely to remain weak and susceptible to gyrations on any news about the global economy.

Data from the Johannesburg Stock Exchange showed foreigners are continuing to ditch local assets, offloading R4.6-billion in bonds and R2-billion in stocks last week.