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S.Africa rand steady, bonds near multi-week highs
By Mmathabo Tladi and Phumza Macanda
JOHANNESBURG (Reuters) - South Africa's rand held steady against the dollar on Friday after crawling back up from six-week lows hit early this week, while bonds ended near multi-week highs.
Domestic blue chip stocks slipped for the first session in three, as banks such as Absa Group fell to profit-taking after a recent run-up.
The Top-40 index of blue chips fell 0.4 percent to 28,664.52, snapping three straight sessions of slight gains.
The broader All-share index declined 0.3 percent to 32,016.30.
The rand firmed by more than 1.5 percent to the dollar in the week and is expected to gain more next week if sentiment towards risky assets remains favourable.
Charts back the view of a firming rand after it pierced the 6.82 level. It is also trading firmer than its 50-, 100- and 200-day moving averages.
It stood at 6.7776 against the dollar at 1550 GMT, not far from Thursday's New York close of 6.77.
"A lot of the risk around the European sovereign debt crisis has been alleviated after the summit yesterday that outlined some of the bailout package," said Brigid Taylor, dealer at Nedbank.
Investors breathed a sigh of relief and took risky bets after euro zone leaders agreed on a second rescue deal for Greece in a bid to stop the debt crisis from spreading.
"We have also seen good demand for our local bonds from foreigners, which just indicates we potentially can see better levels on the rand," Taylor added, forecasting a range of 6.68 to 6.88 for the rand next week.
But the rand will likely meet with some resistance at 6.72, which has previously attracted Reserve Bank and importer buying of foreign exchange.
Risky assets could benefit further next week if U.S. lawmakers break their impasse on raising the debt ceiling to avoid a debt default.
Government bond prices gained as foreigners bought local debt after weak retail sales data and dovish Reserve Bank comments suggested monetary policy could remain accommodative throughout 2011.
The yield on the 4-year bond hit its lowest since mid-January earlier and ended steady at 7.38 percent. The 2026 yield fell to 6-week lows 0f 8.43 percent before coming back to 8.48 percent.
Spreads between local bonds and U.S. Treasuries have narrowed, with that on the 30-year paper and its U.S. equivalent narrowing to 4.52 this week from 4.81 percent last week.
Foreign interest in local debt is expected to continue partly due to the fragility of the local economy and high yields.
In stocks, banks were among the hardest hit as firmer commodity prices prompt investors to shift back into some resource-related companies, which were sold in the last few sessions.
"There has been noticeable sector rotation as (investors) have moved out of the financials and are taking a bit more risk, buying into more resources," says Michele Santagelo, a portfolio manager at Newstrading.
The drop in banks bucked the trend in Europe, where financials have been boosted after euro zone leaders agreed to a second rescue package for debt-ridden Greece.
Johannesburg's index of bank stocks fell nearly 2 percent.
Standard Bank, Africa's largest lender by assets, slid 2.5 percent to 97.60 rand. Absa Group, the South African bank that is majority owned by Britain's Barclays dropped 2 percent to 133.00 rand.
Among the gainers, Mondi Ltd rose more than 2 percent after the paper maker said its first-half earnings would rise by nearly 70 percent. The company said in May it was seeing increases in both price and sales.
Miners also rose, with Anglo American Plc adding 1 percent while AngloGold Ashanti climbed nearly 1 percent.Fri, 22 Jul 2011
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