adminspeculative inflows into the bond market as some players bet on the slight chance the Reserve Bank might cut interest rates today.
An overwhelming majority of economic analysts polled by Reuters last Friday expect the repo rate to stay on hold at 5,5 percent, after the last cut in November last year, as the Reserve Bank eyes rising inflation.
But some market participants think the central bank could loosen policy further after a similar move by the European Central Bank and as domestic economic growth remains sluggish.
Government bonds have edged higher as a partial result and rose further on Wednesday, pushing the yield on the four year bond two basis points lower to 6,35 percent while that for the longer-dated 2026 paper dipped half a basis point to 8,165 percent.
The rand was at 7 8280 to the dollar, just 0,19 percent off its New York close at 7 8130 on Tuesday when it rallied alongside other emerging market currencies on optimism eurozone countries might be getting a handle on their debt problems which have dampened risk appetite.
“We had some rand strength towards the end of the day yesterday, I think some of it is as a result of a stronger bond market on a belief of a higher probability of a rate cut and that’s filtered into the rand,” a trader in Johannesburg said, adding that news that beleaguered Italian Prime Minister Silvio Berlusconi will resign also boosted sentiment.
“Equity markets have also done nicely so the rand is reacting to those positive sentiments all round,” the dealer said. – Reuters.
Online Reporter