JOHANNESBURG: South Africa's rand firmed against the dollar on Tuesday amid hopes the US Federal Reserve will provide more monetary stimulus to the world's biggest economy after a poor retail sales report.
The rand was 0.45 percent firmer against the greenback at 0637 GMT, from Monday's New York close of 8.220, with attention focused on US Federal Reserve Chairman Ben Bernanke's testimony to Congress on Tuesday and Wednesday.
"The rand has moved marginally stronger this morning," said Brigid Taylor, head of institutional sales at Nedbank. "It is largely driven by a lot of speculation that Bernanke's report today will indicate more quantitative easing."
Government bonds gained, with the yield on the three-year bond down a basis point to a record low of 5.730 percent and that on the longer dated 14-year paper down by the same margin to 7.535 percent.
Locally, the South African Reserve Bank kicks off its three-day monetary policy committee meeting on Tuesday and Treasury will auction 2.1 billion rand of its 2023, 2036 and 2048 government bonds at 0900 GMT.
According to 21 of 23 economists polled by Reuters, the central bank will hold its repo rate at a three-decade low of 5.5 percent. The two outlying analysts predicted a 50 basis point cut to prop up growth in Africa's biggest economy.
South Africa's government bonds have received massive support from foreign investors this year, pushing yields to record lows and boosting the local currency.
"We have seen our bond market rallying quite hard over he last week," Taylor said. That has also continued to support the rand levels that we currently seeing."
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