The rand continued to regain lost ground against major currencies in late trade on Thursday‚ on improved risk appetite.
The local currency tested 8.20 against the greenback‚ boosted mainly by the 25-basis-point cut in interest rates by the Chinese central bank.
At 15:38 the rand was bid at R8.2224 to the dollar from Wednesday’s close of R8.3026. It was bid at R10.3737 to the euro from its previous close of R10.4397 on Wednesday and at R12.8081 against sterling from R12.8583 at its previous close. The euro was bid at US$1.2620 from Wednesday’s close of $1.2572.
“The rate cut has sparked a risk-on scenario‚ which is rand-positive. It is good for global growth prospects‚” said Mark Kalkwarf‚ senior portfolio manager at Iquad Group.
RMB said in a note earlier that it had adjusted rand forecasts to reflect the renewed eurozone stresses.
“We now expect high rand volatility over the next quarter‚ with USD/ZAR trading in a range of as much as 8.00–9.00. Risks over this period are to the topside. We expect the trend for rand gains to re-emerge when the eurozone tensions settle down‚ perhaps in the fourth quarter of 2012. Such a pattern would be consistent with previous periods of rand blowouts‚ where gains have typically resumed after four to seven months of extreme volatility.
“Our end-September and year-end forecasts for USD/ZAR are 8.30 and 7.80.”
South African bonds firmed in afternoon trade on Thursday after the rand strengthened to the R8.20 per dollar level.
“Bond trading this afternoon has been driven by the stronger rand‚” a local trader said.
At 16:01‚ the benchmark R157 bond was trading at 6.230 percent from Wednesday’s close of 6.260 percent‚ Tuesday’s close of 6.330 percent and Monday’s close of 6.355 percent. The R207 was trading at 7.505 percent from a previous close of 7.540 percent and the R186 was trading at 8.240 percent from its close of 8.280 percent.
The rand was bid at R8.2425 against the dollar from Wednesday’s close of R8.3026‚ Tuesday’s close of R8.4443‚ Monday’s close of R8.4758 and a worst level on Monday of R8.6291.
Emerging market currencies gained after China's central bank lowered its benchmark interest rates on loans and deposits‚ and moved to allow rates to float more freely‚ in a bid to support growth and advance reform of the financial system.