ALAN FINLAY & Reuters, Johannesburg | Friday 4.00pm.
THE rand was rocked to a fresh record low of R7,01 against the dollar on Friday, in the wake of a strengthening dollar and growing fears of the potential impact on South Africa of political unrest in Zimbabwe.
However by late afternoon it had recovered marginally and was trading at R6,96 to the US currency.
The Johannesburg Stock Exchange followed the rand down, in what traders called “nervous” trade, due in part to President Thabo Mbeki’s failure to take a firm stand on the Zimbabwe crisis in an address to the nation on Thursday.
The overall ended 0,40% or 29 points down. Financials finished 1,96% or 186 points lower, while industrials dipped 0,64% or 53 points. Gold shares slumped 0,41% or 4 points.
At 4pm gold was trading slightly down and weighed in at $279,95 to the ounce on international markets.
The rand lost more than five cents in a matter of minutes in early trading to take it to R7,00 to the dollar, lifting its losses against the US currency so far this year to 13%.
“This is not just based on a strong dollar, but on continued fears about Zimbabwe,” said Luke Shearer, director of foreign exchange dealing at Standard Bank.
“If it breaks definitively through the seven level, I think there’s little doubt that we will see further weakness, bearing in mind that these are levels we have never traded at, so there are no chart points to base ourselves from,” Shearer said.
Traders described Friday’s market as thin with even relatively small sums of money buffeting the exchange rate.
A spokesman for Mbeki on Friday morning rejected suggestions that the rand’s decline is due to problems in Zimbabwe. In a statement released on Thursday, the cabinet said the rand’s fall is due more to weakness in the euro, the dominant currency in South Africa’s trade-weighted basket.
Most of the rand’s slide this year has been attributed to the euro — which has repeatedly hit record lows against the dollar this week — but in the past few weeks Zimbabwe’s problems have also hit sentiment, particularly offshore.
The Hang-Seng also lost ground finishing 0,30% or 45 points down. By late afternoon the Dow Jones was 0,50% or 51 points sharper.