In recent days the popularity of South African bonds amongst investors has resulted in the Rand strengthening against its American counterpart.
Although a disappointing South African Industrial Production figure saw the Rand take some losses during local trade, the currency continues to be supported by the popularity of its nation’s bonds.
At the current exchange rate 1 US Dollar will purchase 8.9392 South African Rand as of 12:00 pm GMT
After the Bank of Japan announced its intention of doubling bond buying in order to bring an end to deflation within the next two years, foreign investors began pumping funds into South Africa’s local bond market.
Last week over 5.4 billion Rand of debt was purchased by foreign investors, and a similar amount of debt has been purchased this week.
Absa Capital, an investment banking service, commented: ‘We have seen foreigners buying some 13 billion rand worth of South Africa bonds over the past 20 days and so long as this trend persists, rand bulls may remain in the ascendancy’.
Meanwhile, a trader with Standard Bank noted: ‘There’s importer demand early in the morning, the oil companies are generally buying Dollars. In the last week or so there’s been a lot of Dollar/Rand selling. 8.85 and 8.88 are big levels so there’s some profit taking around there.’
Yesterday data showed that South African industrial production dropped by 2.9 per cent in February compared with the same period of the previous year. Economists anticipated a gain of 2.1 per cent to follow January’s 3.9 per cent advance.
After the data was released the Rand weakened to 8.9185 against the US Dollar.
The next piece of significant South African economic data, retail sales figures, is due for release in the middle of next week.
Yesterday the Rand was trading in the region of 8.9185 against the US Dollar. It has since weakened to 8.9392.
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