JOHANNESBURG: The rand firmed against the dollar in early Wednesday trade as investors became more optimistic about the latest efforts to save the European union from its debt crisis, lifting risk appetite.
The rand traded at 8.0050 to the dollar, 0.21 percent firmer than the 8.0220 close in New York on Tuesday.
The currency looks to be strengthening but has gotten stuck at the 8.0 level, which if breached will open up 7.86, the rand's next resistance level.
The central bank reported net reserves had fallen in November, decreasing by $588 million compared to October's reserves, as the stronger dollar led to a decrease in foreign exchange reserves.
"The further depreciation of the rand in November could have hampered reserves accumulation due to the higher cost," Nomvuyo Guma from Standard Bank said in a research note.
"The rand has also not responded meaningfully to the reserves data this morning, which implies that rand participants remain preoccupied with developments in the euro zone and changes in sentiment emanating from the unfolding crisis are still driving the currency's movements."
The rand plunged to a 2011 low of 8.61 during November but has recovered some of its losses as importers become less active in the market toward the end of the year.
Government bonds followed the currency firmer, shaking off Tuesday's weakness with yields dropping by 4.5 basis points to 6.655 percent on four-year bonds and by 4.5 basis points to 8.37 percent on the 15-year issues.
The market is expecting to see business confidence data, due to be released at 0930 GMT, to show that corporate sentiment was weaker in November.
Retail sales for October are also seen weaker as consumers spend less. The retail data is due at 1100 GMT.
Comments
Comments are closed for this article.