S.Africa's rand ends volatile day firmer, bonds up

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

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 percent on the four-year note and 8.58 percent on the 2026 bond .

The rand hit a session low of 8.3470 in morning trade and has fluctuated between bought and sold while following global developments with moves exaggerated by thin liquidity.

At 1600 GMT, the rand was trading at 8.0875 to the dollar, 0.4 percent firmer than its previous close in New York.

It briefly dipped below the psychologically key 8 rand 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 dollar-rand got down to a low of 7.95 and equity markets have rebounded a little," a Johannesburg-based dealer said.

"The rand is very 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 8 rand 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 4.6 billion rand ($566 million) in bonds and 2 billion rand in stocks last week.

Copyright Reuters, 2011