JOHANNESBURG: South African bonds and the rand firmed against the U.S. dollar on Tuesday as global oil prices continued to fall, triggering sell-offs in riskier emerging markets with investors preferring to bet on safe-haven currencies and fixed income.
At 1410 GMT the rand had firmed 0.15 percent to 11.6940 per dollar, as volatile trade saw the currency seesaw near three-week lows before pulling back closer to a 11.6800 resistance level.
Bonds continued a recent strong run, with the benchmark government issue due in 2026 shedding 15.5 points to 7.78 percent, just shy of a four-week low.
The price of brent crude tumbled to fresh 5-1/2 year lows, to $51 a barrel, after a speech by the king of Saudi Arabia gave no indication the top producer would cut supply to push up sagging prices.
Persistent weakness in oil has seen local petrol prices decrease to two-year lows and inflation ease to within the central bank's target range of below 6 percent.
Market watchers said a low oil price would help keep a lid on interest rates in 2015.
"But if the oil price starts rising that could change very quickly," said Johan Rossouw, economic strategist at Vunani Securities. "The central bank won't allow the rand to deteriorate ad infinitum and will have to raise interest rates."
Earlier, HSBC's PMI survey showed South Africa's private sector expanded at its slowest rate in five months in December due to a decline in output and new orders.
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