Rand firms against the dollar
JOHANNESBURG (Reuters) - South Africa's rand trended firmer on Tuesday, cheered by a stronger euro, but struggled to make a clear break through the key 6.50/dollar mark as corporates snapped up the greenback, analysts said.
The rand firmed almost 1 percent to 6.6875 -- its strongest level since May 25, according to Reuters data. It was trading around 6.5275 per dollar by 1435 GMT compared to 6.55 at close in New York on Monday.
"Some good early interest out of London, including a U.S. bank, helped the rand back below the 6.50/dollar before local corporate buyers moved in to defend support at 6.48," said Nicholas Kennedy, an analyst at 4Cast in London.
Analysts said the rand was being driven by the euro, the currency of South Africa's main trade partner. They expected the currency to eventually break through 6.50/dollar in the short-term.
"There is a big chance it is going to break lower. It looks like the dollar is coming a bit under pressure and looks it will hold above $1.22 or break higher. The local currency market still follows the euro," said Jacques Potgieter, an analyst at Sanlam Securities.
The rand has battled to break through 6.50/dlr, coming close on a number of occasions over the past couple of months only to fail, suggesting that it is a key technical level.
"Everybody is waiting for the break. It looks like some stop-losses are being protected there. Once we see a break below that (6.50/dlr) we could go down to 6.38 and maybe back to 6.30," said Potgieter.
One factor seen boding well for the rand's advance was Monday's rating upgrade by Standard & Poor's. Standard & Poor's raised its long-term foreign and local currency sovereign credit ratings on the country to BBB+ from BBB and to A+ from A respectively.
The rand has trimmed its losses versus the dollar so far this year to 13.5 percent. The euro was around $1.2202 compared to $1.2174 at close in New York.
South African government bonds were a touch firmer. Traders said the market was watching lacklustre U.S. Treasuries. There was also an element of profit-taking, traders said.
The yield on the benchmark R153 bond due 2010 was down 1.5 basis point at 7.48 percent.
Bonds rallied last week as tame inflation data rekindled hopes on an interest rate cut by October this year. The central bank has slashed the main repo rate by 6.5 percentage points to 7 percent between June 2003 and April this year.