JOHANNESBURG: The rand firmed against the dollar on Wednesday, recouping some losses from the past three sessions as dollar traders shy away from the 10.50 resistance level.
South Africa's currency was recovering from a sell-off that took it to 11-week lows in the previous session, as investors shunned emerging markets on expectations that the US Federal Reserve would reduce stimulus sooner than expected. By 0625 GMT on Wednesday, the rand was up 0.3 percent to 10.3355/dollar. It had closed at 10.3650 in the New York session on Tuesday.
"Dollar/rand posted a shooting star reversal pattern yesterday ahead of the 10.50-10.55 resistance area. We are looking for some respite towards the 10.00-10.10 area before another attempt is made to surpass 10.55," said Judy Padayachee, a technical strategist for Absa Capital. Strong US jobs data on Friday has led some investors to move forward to December expectations of when the Federal Reserve might start to reduce its monthly stimulus programme.
South African assets have been under pressure from the US jobs data, as a cutback in the Fed's bond-buying could choke inflows that have supported emerging markets. Africa's largest economy is more vulnerable than its peers to this expected cutback because of a gaping hole in its current account, which has historically been funded by foreign inflows.
Yields on government bonds recovered along with the rand currency in early trade on Wednesday. The benchmark 2026 yield gave up 6.5 basis points to 8.265 percent, with the 2015 note down by the same margin at 6.18 percent.
Yields were coming down after three days of steady climbing, with traders saying liquidity was slowly returning to the market. South Africa will release retail sales data for September at 1100 GMT.
Sales growth is expected to have slowed to 2.5 percent year-on-year from 3 percent previously.
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