JOHANNESBURG: The rand firmed for the second day against the dollar on Tuesday, bouncing from major support around 8.50 to the dollar, which was sold in renewed anticipation that the US Federal Reserve and ECB would inject more money into the global economy.
The rand was at 8.3650 by 0640 GMT, 0.26 percent stronger than its close in New York on Monday.
The unit neared 8.50 on Thursday and Friday but failed to break through the barrier, instead bouncing all the way to 8.3475 on Tuesday morning.
The recovery is based on renewed expectations of coordinated stimulus by global authorities, such as a third round of quantitative easing from the US Federal Reserve. Such expectations are putting pressure on the dollar, dealers said.
Speculation was also rife that the European Central Bank (ECB) will announce details of a bond-buying programme after its policy-setting meeting on Thursday.
"We believe that the bias remains in a favour of extended rand strength over the coming days provided that the central banks do indeed provide the liquidity that the market is looking for," Absa Capital said in a note.
The rand has managed to test 8.35 resistance but has so far failed to make a convincing break of that level.
"We are watching the 8.35 and 8.50 levels for direction. A close below 8.33 would signal that the consolidation patterns have further to go and as such, another downward leg could unfold to 8.20-8.30 in the near term," Absa technical strategist Judy Padayachee said.
Government bonds were also supported by the prospect of more cash flowing into emerging markets through the global central banks' monetary easing programmes.
Yields dropped to over one-month lows to 5.395 percent on the 2015 note and 7.325 percent on the longer 14-year paper.
Treasury is selling 2.1 billion rand ($250 million) spread between its 2023, 2018 and 2048 paper in the session. Results are due after the auction closes at 0900 GMT.
At 0900 GMT the vehicle association will release new car sales data for August, one of few economic indicators that have continually surprised higher this year. Sales were up 18.3 percent in July and are expected to continue the positive trend.
Comments
Comments are closed for this article.