South Africa's rand on back foot, bonds edge up

26 Mar, 2012

JOHANNESBURG: The South African rand was off last week's four-week lows against the dollar on Monday but remained on the back foot, with renewed worries on China's growth prospects likely to weigh on commodity currencies overall.

Government bonds edged higher, extending last week's gains as investors, who are now seeing a lesser chance of domestic interest rate cuts this year, buy back into local debt.

The yields on the benchmark three-year and 14-year paper each shed a basis point to 6.82 percent and 8.45 percent respectively.

"There was a lot of short-covering last week, with about 2.5 billion rand bought by foreigners on Friday, so there's definitely been good demand after CPI came out lower than expected," a Johannesburg bond trader said.

"A lot of guys were pricing in rate hikes before that and that's reversed aggressively."

By 0647 GMT the local currency was at 7.7030 to the greenback, a loss of 0.3 percent from Friday's close.

"Resurgent concerns overChina's growth has commodity prices and commodity currencies under pressure this morning," Standard Bank strategist Nomvuyo Guma said in a note.

 The rand should however find support around the 7.75 percent level, after failing to push beyond that both on Thursday and on Friday, when it bounced back to close at 7.68.

"(This) could imply that the bearish momentum that characterized most of last week's trade has run out of steam," said Absa Capital.

Copyright Reuters, 2012

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