President Jacob Zuma and Western Cape Premier Helen Zille (obscured by child greeting her) are seen during a visit to Green Point stadium in Cape Town with 365 days to kick-off of the 2010 Fifa World Cup, Thursday, 11 June 2009.
Originally uploaded by Pan-African News Wire File Photos
Fri Jun 26, 2009 4:16pm GMT
JOHANNESBURG (Reuters) - South Africa's rand firmed to a near-month high against the dollar on Friday, benefitting from its carry trade appeal after the central bank left the key repo rate unchanged at 7.5 percent the previous day.
Blue-chips regrouped after the previous day's losses, boosted by stronger banking and mining stocks on investors' expectations that the economy may recover soon.
The rand gained as much as 1.5 percent to a session high of 7.8825 against the dollar, its strongest level since June 1, before retreating to 7.9175 by 1531 GMT, still up 1.15 percent from Thursday's New York close at 8.01.
"The rand has done relatively well today. We've seen the dollar come off across the board, which has helped to give the rand a little bit of momentum," said Brigid Taylor, a rand trader at RMB in Johannesburg.
"Interest rates remaining stagnant has created that opportunity for potential for carry, because we've still got a good interest rate differential, so that's beneficial to the rand," she added.
In carry trades, investors sell low-yielding currencies to fund purchases of riskier, but higher-yielding assets like the rand.
The central bank's decision to hold rates steady on Thursday hit local bonds and stocks, but supported the rand, because it means the currency continues to enjoy a high yield appeal.
"We do expect to see quite significant (rand) support at 7.90, and once that does go through, it does open up 7.60 and 7.50 on the downside, and that is the bias for the rand currently," said Taylor.
The Top-40 Index of blue chips traded 2.5 percent higher earlier in the session, but reversed course around noon to close 0.67 percent up to 20,099.47 points. The broader All-Share Index was 0.69 percent higher at 22,308.28 points.
"The market is very resilient at the moment to bad news and expecting things to improve over the medium term," Ferdi Heyneke, a portfolio manager at Afrifocus Securities said, referring to the market's recovery after Thursday's fall.
"Maybe the central bank thinks the economy has seen the worst and is starting to show signs of improvements -- that's why it was happy to hold the rates," Heyneke said.
Banking stocks posted the biggest gains on the bourse, led by the country's No.2 banking group FirstRand Ltd which climbed 3.45 percent to 13.80 rand while Standard Bank rose 3.25 percent to 87 rand.
Miners were among top gainers as gold hit a two-week high and platinum also climbed higher. Diversified miner African Rainbow Minerals gained 2.81 percent to 134 rand and Impala Platinum, the world's second largest producer of the precious metal, rose percent to rand.
Africa's biggest generic drug maker Aspen Pharmacare, was the top performer, gaining 4.49 percent to 55.90 rand.
Shares in South African ferrochrome producer Merafe Resources climbed 5.15 percent after the company said the European benchmark ferrochrome price had been settled at $0.89 per pound for the third quarter of 2009.
South African government bonds were also firmer, pushing yields down in turn. The 2015 bond yield fell 5 basis points to 8.455 percent, while that for the R209 bond maturing in 2036 shed 12.5 basis points to 8.485 percent.
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