Rand weaker, seen directed by global markets

22 Sep 2008 08:45 - Staff Reporter

South Africa's rand treaded weaker ground against the dollar on Monday, rattled in part by President Thabo Mbeki's resignation.

South Africa’s rand treaded weaker ground against the dollar on Monday, rattled in part by President Thabo Mbeki’s resignation at the weekend, but traders the currency would take its cue more from global market activity than local politics.

At 6.49am GMT the rand was 1,76% weaker at 8,05 versus the greenback after closing on Friday at 7,9105.

The rand had rallied nearly 3,9% to 7,8655 on Friday, latching on to global market gains after the United States Federal Reserve announced a series of measures to provide liquidity to systems hit by a financial sector crisis.

But the unit dropped nearly 1,5% in electronic trading late on Sunday after Mbeki announced he was quitting over charges he interfered in the corruption case against Jacob Zuma, who replaced him as ruling ANC party leader in a bruising battle last December.

The market would focus most of its attention on Monday on financial turmoil which has its roots in the US sub-prime market, said RMB trader Jim Bryson.

“I think in a way the whole political thing has developed at a good time because there’s so much happening everywhere else, we’re kind of not on the main radar,” Bryson said.

“There’s still huge uncertainty and the rand is going to trade very nervously and we could be in for a wide day [range-wise]. I think we’ll be looking at 7,98-8,08 and we’ll see how we react to events as they unfold.”

By 6.49am GMT, before the market opening at 7am GMT, South Africa’s blue chip Top-40 December futures contract was up 1,9%.

“I would expect local stocks to open reasonably firmer on the back of stronger global bourses and a weaker currency,” said a Johannesburg trader.

“The political news may mute the positive effect of firmer global markets but it was largely expected and there is so much global turmoil that that’s what’s really dominating.”

Government bonds fell with the rand, and yields edged higher, with the benchmark 2015 bond up 5,5 basis points at 9,065% while the yield for the 2036 note added three basis points to 8,35%.