Bonds lose firmer bias as dollar regains some ground on the euro
South African bonds struggled to hold onto firmer levels on Thursday as the dollar regained some lost ground following the release of the latest meeting minutes from the US Federal Reserve’s federal open market committee (FOMC).
The less hawkish tone adopted by the committee initially caused the dollar to weaken and the rand to strengthen, with the local currency reaching a monthly best of R13.4535 to the dollar, from Wednesday’s R13.5217, before weakening again in later trade.
The dollar was slightly stronger to the euro on Thursday afternoon, ahead of speeches by two permanent members of the FOMC, Lael Brainard and Jerome Powell, later in the day. Both are regarded as moderately hawkish, with Powell a possible replacement for current chairperson Janet Yellen when she retires in February next year.
"Both appear to fall into the unconvinced category when it comes to the debate on inflation," said Oanda analyst Craig Erlam.
The US producer price index came in at an expected 0.4%, which also provided some support for the dollar.
Market focus has now turned to Friday’s release of US consumer inflation data amid a seemingly divided Fed regarding further rate hikes later this year and next. A higher-than-expected inflation number would boost the likelihood of interest-rate increases.
At 3.05pm, the R186 was bid at 8.695% from 8.680% and the R207 was unchanged at 7.39%.
The rand was at R13.5434 to the dollar from R13.5217 and the euro was at $1.1846 from $1.1867.
The US 10-year bond was at 2.3323% from 2.3492%.