JOHANNESBURG- South Africa’s rand and bonds ended the week firmer on Friday as positive sentiment got a lift from the Group of 20’s commitment to help fight the euro zone’s debt problems, completing a strong week for local assets.
The Group of 20 nations stood ready to commit at least $400 billion to bulk up the International Monetary Fund to ensure it has enough firepower to respond if Europe’s debt crisis escalated.
The rand was trading at 7.802, 0.7 percent firmer against the U.S dollar at 1615 GMT from New York’s close of 7.8556. It was performing best compared to 20 emerging market currencies tracked by Reuters.
Improved sentiment from robust demand at a Spanish bond auction on Thursday also filtered into Friday.
“I think the market rebounded on the back of the positive Spanish auction we saw yesterday,” said Brigid Taylor, head of institutional sales at Nedbank.
Even though Spanish government bond yields are on the rise, investors buying into 2.5 billion euros of bonds offered at Thursday’s auction was taken as a good sign.
The rand breached the 7.80/dlr level and then retreated but analysts saw the rand launching another attack on the level in the next session.
Government bonds firmed along with the currency, with the 2015 yield falling 6 basis points to 6.46 percent and that on the 2026 issue dipping 7.5 basis points to 8.105 percent.
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Bonds were largely supported by interest from the international market on the back of a Citigroup announcement on Tuesday that South African debt may be included in its World Government Bonds Index (WBDI).
Yields have rallied to fresh yearly lows since the release of the news.
“Certainly we have seen continued buying from foreign accounts so this has kept the mood positive,” said Leon Myburgh, sub-Saharan Africa strategist at Citigroup.
