S.Africa rand at 3-month high vs dollar, bonds gain

JOHANNESBURG: South Africa's rand touched a new 3-month high against the dollar on Thursday, extending the previous day's gains triggered by central bank comments that raised expectations of higher interest rates by the end of the year.

Government bonds recouped a fraction of Wednesday's losses after yields had risen in response to comments by Reserve Bank Governor Gill Marcus that the bank would take whatever measures necessary to tackle inflation.

This has prompted the foreign currency and debt markets to price in a greater chance of more rate increases before year-end.

The yield on the shorter-dated 2015 government bond fell two basis points to 7.83 percent on Thursday while that on the 2026 bond shed 1.5 basis points to 9.005 percent.

At 0650 GMT on Thursday, the rand traded 0.49 percent firmer at 6.7915 against the dollar compared with the previous day's close of 6.8266. This is its strongest level since Jan. 7 according to Reuters data.

"The rand is performing very well and continues to be encouraged by global equity markets and higher interest rates," a trader in Johannesburg said.

"It has broken a key level at 6.85 which had proved to be good resistence. Our next stop is 6.77, although you will probably see some reserves accumulation at some stage," he added.

On Tuesday Marcus said it was a challenge identifying what measures to take to tackle gains in the rand, which strengthened about 12 percent against the greenback last year despite the central bank spending just under 55 billion rand accumulating reserves.

The currency fell about 10 percent against the greenback in the first two months of this year, but has since reversed most of those losses.

The JSE's blue-chip June stock futures contract was up 0.37 percent before the bourse's open at 0700 GMT, suggesting a slightly firmer start for local shares.

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