July 14, 2011 / 4:30 PM / in 6 years

S.Africa's rand and stocks fall, bonds up

4 Min Read

* Rand softer as c.bank buys FX

* Foreign buying boosts bonds

* Stocks fall, gold miners down after data

By Mmathabo Tladi and Phumza Macanda

JOHANNESBURG, July 14 (Reuters) - South Africa's rand softened against the dollar on Thursday, with dealers saying the Reserve Bank came into the market to buy foreign exchange after it rallied from 6-week lows.

After trading in positive territory for most of the day, local stock indices turned negative as data showing gold output fell in May weighed on gold stocks, sending the gold index 1 percent into the red.

A wave of strikes across industry, including the key mining sector, also undermined investor confidence. But the strikes' impact was offset by higher platinum prices that boosted producers of the metal and helped to limit heavier losses.

Government bonds bucked the trend, ending firmer as offshore buyers came back, with spreads between local paper and U.S. debt narrowing. The spread between the 10-year bond and similar-dated U.S. benchmark was down 5.8 basis points while the 30-year spread narrowed by 9 basis points.

Foreigners have increased their purchase of local debt in the past two months, attracted by higher yields and prospects of monetary policy remaining accommodative this year.

The yield on the 2015 bond was down four basis points to 7.48 percent and that on the 2026 note fell five basis points to 8.6 percent.

The rand was trading at 6.8628 to the dollar at 1605 GMT, 0.68 percent weaker than Wednesday's New York close of 6.8155. It was in the bottom two of worst performers among emerging market currencies tracked by Reuters on the day. The rand has recovered from 6-week lows of 6.9512 on Tuesday and hit a session high of 6.7830 earlier.

"The rand has been an under performer today, with early local selling ... the SARB (South African Reserve Bank) were intervening in the FX market buying dollar/rand so this pushed the rand lower and it never recovered," said Christopher Shiells, emerging markets analyst at IGM.

The rand has seen a lot of support at 6.90 from exporters selling dollars and will have to break that level decisively to weaken further.

Shiells said the local currency was unlikely to weaken to 7.00/dollar over the next few days and the focus will turn to next week's events, which include June's inflation numbers and the Reserve Bank's Monetary Policy Committee meeting.

Bonds are likely to gain if the MPC strikes a dovish tone and highlights worries about a slow recovery. Divided for now, the market is looking for clearer signals of when the bank will start raising rates and a dovish statement could prompt even more players to push back forecasts for increases to next year.

On the bourse, the JSE Top-40 index of blue chips down 0.37 percent to 28,847.47 and the broader All-Share index falling 0.33 percent to 32,203.94.

The outlook for the mining sector has worsened in recent weeks, with the strong rand, a slowdown in global demand as well as infrastructure constraints hurting the sector. But for now, strong metal prices were supporting platinum stocks in the world's top producer of the precious metal.

Spot platinum rose as high as $1777.50 an ounce, while the U.S. dollar slipped in early New York trade.

"The weaker dollar helped platinum prices," said Mitchell Gannaway, a trader at Thebe Securities.

Anglo Platinum gained on the back of stronger global prices for the metal, Northam Platinum rose 2.5 percent to 40.50 rand and Amplats went up 2.3 percent to 612.52 rand.

Talk of nationalisation of mines from the youth wing of the ruling ANC party is also likely to keep investors wary of heavy investment in local miners. (Editing by Ruth Pitchford)

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