Vulnerable South Africa's rand rebounds on corporate demand

JOHANNESBURG (Reuters) - South Africa's rand bounced back in early trade on Wednesday as flows of offshore corporate earnings ahead of the end of the financial quarter offset strong demand for the dollar.

The rand was at 10.0551 against the dollar at 0651 GMT, 0.4 percent stronger than its New York close of 10.0975 overnight.

The local unit, which is slightly stronger so far this month, has been resilient in the past few days after slumping to a four-year low in early June but traders have said the recovery lacked solid fundamentals.

The main highlight of the day for traders will be a speech by Reserve Bank governor Gill Marcus to a business seminar in Johannesburg at 1000 GMT.

With the end of the financial quarter looming, South African companies with operations overseas are continuing to support the rand as they switch their dollar-denominated earnings to the local currency.

"If one were looking for fundamental justification for the rand's vulnerability one need look no further than the massive imbalances that South Africa continues to generate and the over-reliance on foreign investors and inflows to keep these imbalances financed," Tradition Analytics said in a note.

Government bonds were little changed but remain vulnerable in the wake of the U.S. Federal Reserve's plan gradually to withdraw its stimulus programme as the world's biggest economy show signs of recovery.

The yield, which moves inversely to the price, on the benchmark bond due in 2026 was at 8.215 percent, while the paper due in 2015 was at 6.400 percent.

Emerging markets have been heavily sold after Federal Reserve Chairman Ben Bernanke said last week the U.S. central bank could soon start scaling down its monthly $85 billion in asset purchases, which have boosted appetite for risky assets such the rand and local bonds.

Source: http://news.yahoo.com/vulnerable-south-africas-rand-rebounds-corporate-demand-070326461.html

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