Rand steady as investors assess US Treasury bond-market support

The rand was flat against the dollar in early trading on 20 August as global investors refrained from taking large positions while assessing a surprise move by the US Treasury to support the bond market.

Early Thursday morning, the local currency traded at R16.09 to the dollar, unchanged from its previous close.

Adam Phillips of Umkhulu Treasury said the rand was likely to remain rangebound for the rest of the week. A close below R16.1470 on Friday could, however, provide the rand with scope to strengthen, he said.

Like other risk-sensitive currencies, the rand is taking its direction largely from international developments in the absence of major domestic economic data.

The dollar weakened against a basket of currencies after the US Treasury said it would double buyback operations for longer-dated government bonds to improve market liquidity. The announcement followed a sharp bond sell-off, as investors demanded higher returns amid increased inflation risks linked to the US-Israeli war on Iran.

ETM Analytics said the Treasury’s move had improved global risk appetite and encouraged demand for higher-yielding assets, including South African bonds.

South Africa’s benchmark 2035 government bond was steady in early trading, with its yield down half a basis point at 8.465%.