The rand was stronger in early trade on Friday as traders reacted to the US Federal Reserve’s announcement of an open-ended commitment to expand its balance sheet.
“Confirmation overnight that the Fed has entered into another round of quantitative easing ensured the rand recouped half of the losses it incurred in relation to the dollar on Wednesday as a result of local mining strike activity‚” Absa Capital said in its daily report.
“The rand also strengthened against the euro yesterday‚ which implied that the rand is once again taking its cue mainly from the level of global sentiment and has not just merely latched onto the weak dollar environment‚” it said.
At 8.31am‚ the rand was bid at R8.1955 to the dollar from R8.2365 at Thursday’s close. It was bid at R10.6876 to the euro from its previous close of R10.7043 and at R13.2704 against sterling from R13.3008 before. The euro was bid at $1.3040 from $1.2994 at Thursday’s close.
Gold was trading at US$1774.91 per ounce.
“Meanwhile‚ the fact that Lonmin workers will consider a wage offer today‚ together with suggestions from the government that it will today discuss ways to defuse the mining situation‚ should be supportive of a firmer rand environment‚” it said.
“Although the rand weakened sharply this weekly on the country’s mining difficulties‚ our forecast is that some common ground will be reached among the various stakeholders and that the rand will take advantage of the more risk-friendly global environment and WGBI (World Government Bond Index) inflows over the coming months‚” Absa Capital said.
Bonds firmer on rand recovery‚ QE3
The South African bond market was firmer in early trade on Friday after the announcement of a monthly $40bn quantitative easing (QE3) bond-buying programme by the US Federal Reserve on Thursday evening saw the rand recover from Thursday’s worst level of R8.4446 per dollar.
“The QE3 announcement gave impetus to risk-off trades and emerging-market assets gained‚” a local bond trader said.
At 8.33am‚ the benchmark R157 bond was trading at 5.430 percent from 5.480 percent at Thursday’s and Wednesday’s close. The R207 was bid at 6.450 percent and offered at 6.430 percent from Thursday’s close of 6.490 percent and Wednesday’s close of 6.485 percent‚ and the R186 was trading at 7.380 percent from 7.430 percent at its previous close.