JOHANNESBURG: The rand handed back some of the past week's gains against the dollar early on Friday but bonds were firmer, hinting at inflows that could help the currency gain ground later in the session.
Foreign investors have poured funds into South Africa's local bond market since the Bank of Japan announced its aggressive new policy stance to deal with deflation, which involves pumping billions of cheap yen into financial markets.
That has helped the rand post gains for the last six sessions, breaking through big psychological resistance at 9 rand and then through 8.90.
Yields on benchmark government debt were 1.5 basis points lower at 5.285 percent on the 2015 note and 7.04 percent on the 2026 issue.
"We have seen foreigners buying some 13 billion rand ($1.5 billion) worth of South Africa bonds over the past 20 days and so long as this trend persists, rand bulls may remain in the ascendancy," said Absa Capital in a note to clients.
The rand has traded weaker in the local morning sessions this past week as importers come in to buy. The currency tends to recover and strengthen by the afternoon session.
"There's importer demand early in the morning, the oil companies are generally buying dollars," said Jan Defouw, a trader at Standard Bank.
By 0627 GMT, the rand was at 8.9041, 0.2 percent weaker than its previous close in New York on Thursday.
"In the last week or so there's been a lot of dollar/rand selling. 8.85 and 8.88 are big levels so there's some profit taking around there," Defouw added.
The South African Treasury will sell 800 million rand of inflation-linked paper in an auction at 0930 GMT.
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