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S Africa rand at 3-month highs, miners up on metal prices
By Phumza Macanda and Tiisetso Motsoeneng
JOHANNESBURG (Reuters) - South Africa's rand ended the week higher against a broadly weaker dollar on Friday but the rally could run out of steam after strong gains in recent weeks.
South African assets have been boosted recently along with other emerging markets as investors grow more confident about the global economic recovery and take advantage of rock bottom interest rates in the United States and Japan to invest elsewhere.
Domestic stocks booked their third straight week of gains with miners topping the gainers' list on stronger metal prices, which were boosted by the weaker dollar and recovery optimism.
The rand has climbed to fresh 3-month peaks every session this week, hitting 6.6310 on Friday partly on the back of favourable risk appetite.
By 1520 GMT, it was trading at 6.6447 to the dollar, 0.2 percent stronger than New York's close of 6.6635.
The rand will have to break 6.62 to open up the Jan 3 high of 6.55, but such a move will be a struggle.
"There's no denying the fact that the carry play is still in favour and there could be more gains in coming weeks especially if you look at the dollar which is being hammered," said Ion de Vleeschauwer, chief dealer at Bidvest.
"But it wll be tough to gain further and I expect it to find resistance in the 6.60 area," de Vleeschauwer said
The carry trade involves borrowing where interest rates are low and using funds raised to invest in higher-yielding assets.
Against the euro the rand has been rangebound, last trading at 9.58, off 3-month highs of 9.41 seen last week.
Reserve Bank Deputy Governor Daniel Mminele said late on Thursday the bank would continue building reserves but was not targeting a level for the exchange rate.
He said speculation among some analysts that the bank was comfortable with rand gains that are helping contain inflation were "misplaced".
Bonds strengthened in line with the rand taking yields to their lowest since late-February. Bonds will not likely sustain these gains mainly due to inflation concerns, analysts said.
The yield on the 2015 bond was down three basis points to 7.68 percent and that on the 2026 paper fell seven basis points to 8.625 percent.
On the bourse, Johannesburg's Top-40 blue-chip index added 0.58 percent to 29,561.08 points and the broader All-share index was up 0.53 percent at 32,806.27.
"The dollar is bit weaker and commodity prices are right up there but I think there's still an underlying nervousness in the market," one Johannesburg-based trader said.
"Libya is still a concern, Japan is still a concern and Europe is still struggling with debt. So this positive mood is fragile."
Violence in Libya, political unrest in North Africa and the Middle East, and Japan's March 11 earthquake had eroded confidence in commodities perceived as risky such as base metals.
But optimism in global economic growth has since returned, lifting world shares to their highest level in more than three years, and leading to gains in commodities.
Among equity movers, Anglo American climbed 2.79 percent to 362.85 rand and rival BHP Billiton was 2.04 percent better at 280.70 rand.
Copper rose about 2 percent to its highest level in a month as a weaker dollar and expectations for increasing demand boosted investor sentiment.
Elsewhere, Evraz Highveld Steel edged down 0.88 percent to 67.89 rand, after the steel maker said hot metal fell 8 percent in the first quarter.
Metorex lost 0.7 percent to 7.05 rand even after Brazil's Vale offered to buy the base metal miner for 7.5 billion rand, or 7.35 rand per share.Fri, 08 Apr 2011
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