Rand holds steady ahead of key data releases

The rand was steady at reasonably firmer levels against the dollar in midmorning trade on Monday, with markets appearing to take big bets before key data releases later in the week.

US nonfarm payrolls will be watched on Friday for signs of upward pressure on inflation, which could then help shape US Federal Reserve’s view on interest rates.

The rand has previously fallen victim to the expectation of high interest rates in the world’s largest economy via bond outflows, in particular.

But South African markets have held up reasonably well in July, with the rand gaining nearly 4% against the dollar, in a rally that could help alleviate the concern about further fuel prices in the short term.

Higher fuel prices contributed to the recent acceleration in headline inflation, prompting the South African Reserve Bank to leave rates on hold when its monetary policy committee met just more than a week ago.

Foreigners were net buyers of local bonds to the value R5.68bn over the past week, nudging government bond yields lower in the process.

Markets will also keep a close a watch on the Bank of England (BoE), which widely tipped to increase rates on Thursday.

On Tuesday, the Bank of Japan (BoJ) could announce plans to tweak its stimulus programme, a development that could strengthen the yen.

The ultra-loose monetary policies in the developed markets have previously benefited higher yielding currencies such as the rand.

At 10.41am, the rand was at R13.1903 from R13.1882, at R15.3906 to the euro from R15.3729, and at R17.3086 to the pound from R17.2781.

The yield on the benchmark R186 held broadly steady at 8.595%, from 8.57%.