S.Africa rand steadies, dealers cite c.bank dollar buying

JOHANNESBURG (Reuters) - South Africa's rand steadied on Wednesday after traders cited the central bank as buying dollars on the market late in the previous session as part of its campaign to raise hard currency reserves.

The rand rose to 3-1/2 month highs overnight on a surge in risk appetite which should continue to support the currency this week.

"We saw the Reserve Bank buy quite a lot of dollars yesterday, more than normal; they seem to have drawn a line in the sand as to how strong they want this rand to go," a trader in Johannesburg said.

"The rand held up quite nicely above the technical level of 7.29 . There's quite a lot of support there. For today 7.29/30 is still very crucial, If we get through that, we're looking at 27.20 which is this year's (dollar/rand) lows from April.

The bank has previously said it will allow the market to determine the rand's trading levels, but will also take advantage of its strong levels to build up its reserves of dollars and other currencies.

Traders anticipated little immediate impact from domestic consumer price data at 0930 GMT which is expected to show inflation slowed slightly to 4.5 percent year-on-year in June.

At 0650 GMT, the rand traded at 7.34 to the greenback, little changed from Tuesday's close of 7.3450. The rand rallied to 7.2950 overnight, its strongest level since mid April according to Reuters data.

"It's very difficult to see the rand weakening with high yield currencies still very strong at the moment," the trader added.

The JSE's Top-40 September futures contract was up 0.94 percent, suggesting another strong session for the local bourse after it halted five days of gains on Tuesday.

Government bonds edged up slightly, and the yields on the 2015 and 2036 notes subsequently dipped half a basis point each to 7.68 and 8.61 percent respectively.