US bailout worries weigh on rand

JOHANNESBURG, SOUTH AFRICA - Nov 13 2008 09:14

The rand weakened against the dollar on Thursday as worries returned to the market after the United States backed away from buying troubled mortgage assets.

The move increased uncertainty about whether the US will succeed in its banking rescue plans, and pushed global stocks lower. World markets are gripped by a credit crisis with its roots in the US subprime mortgage market.

The local course looked set to follow international stocks lower, with the blue chip top-40 December futures contract down 3,66%t ahead of the 7am GMT open.

At 6.30am GMT the rand was trading at 10,57 to the dollar, about 0,76% weaker than its last New York close of 10,49 on Wednesday.

"There's so much negativity back in the market and after what Paulson said about the subprime, a little bit of uncertainty crept back in the market. The dollar also had a good night," said Jim Bryson, chief dealer at RMB.

"There's no real positives for the rand right now but we need to break 10,85 to weaken further," he added.

But some analysts said the rand could rebound in the next few days.

"Thin market conditions make short-term forecasts extremely unreliable, yet we note that the rand has very quickly hit the oversold mark, raising expectations of an imminent short-term bounce," said Alvise Marino, emerging market analyst at IDEAglobal.

"Our bias remains for further range-bound trading, yet with a shift towards the 10,05-10,54 range." -- Reuters

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