South Africa's rand strengthened against the dollar on Friday as risk aversion, abated after a week of volatility that saw most emerging-market currencies weaken on deteriorating prospects for global growth. At 1458 GMT the rand traded at 11.0840 per dollar, 0.23 percent firmer than its New York close, as it pared losses that had seen it touch 11.1995 in the previous session- its weakest level in more than a week.
Locally, eyes are focused on Finance Minister Nhlanhla Nene's budget speech next Wednesday. A Reuters poll of economists conducted this past week found they expect South Africa's economic growth to accelerate next year if labour relations don't deteriorate again.
"The risk is that government is still pro unions and that it risks seeing a continuation of disagreements in the future," said Sean Mcalgan, an economist at ETM Analytics. "They do have a lot of strings to pull for the market to be satisfied, assuming that those worsened budget outcomes are a reality." The possible return to recession in the euro zone, slowing growth in China and the Ebola crisis have rattled investors already nervous about the end of years of US stimulus.
A speech by Federal Reserve chair Janet Yellen on Friday offered little indication US interest rates would not rise by mid 2015. But global markets did react when Fed President James Bullar said on Thursday the central bank may keep buying bonds longer than it had planned.
The news offered some respite to fixed income markets of emerging economies like South Africa. They benefited from investment flows as a result of near-zero interest rates in the United States, stemming from its stimulus programme known as quantitative easing, or QE. Yields on government bonds were flat, with the benchmark paper due in 2026 unmoved at 8.115 percent.
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