OWN CORRESPONDENT, Johannesburg | Thursday
THE South African rand has fallen to a record low of 7.76 against the US dollar on Thursday on the back of a weaker euro and jitters surrounding Argentina’s steep interest rate hike.
The rand dipped to new lows as the euro – the currency of South Africa’s major trading partners – lost ground as it expected any Bush administration in the United States to be less inclined to back G7 intervention to prop up the euro.
Republican George W Bush assured Americans he would be their next president after the recount in the key state of Florida was completed.
Investors are also fearful that South America’s second-largest economy will be unable to meet $19.5bn in financing needs next year, given its inability to get the economy growing after more than two years of recession and stagnation.
”There has been a lot of stop losses this morning with bids at as high as 7.77,” said one Johannesburg trader.
”This thing is in break up. The market senses blood,” said another trader who said the rand was targeting 7.85 to dollar.
Rand was technically supported at 7.8050 and 7.900, Barclays in Johannesburg said in a commentary. Rand last bid at 7.75/dlr.
Rand weakness and its inflationary potential is expected to be an issue of concern at Reserve Bank’s next Monetary Policy Committee (MPC) meeting starting on November 15, traders said.
The Reserve Bank increased its key repo interest rate by 25 basis points last month – its first increase since the emerging markets crisis of 1998 – to signal tightening monetary policy and stem the rand’s decline.
The rand has lost some 22% against the US currency this year. The previous low was 7.71 hit on October 18.
The euro – the currency of South Africa’s main trading partners – was last bid at $0.8529. The rand also lost ground against sterling and the euro to 10.98 and 6.61 respectively. – Reuters
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