/ 1 January 2002

Rand weakens against dollar, trades in narrow range

The rand weakened further against the US dollar on Wednesday, with troubles in Uruguay sparking fresh emerging markets jitters, but trading remained within a narrow range, traders said.

The rand was trading at 10,1615 to the dollar at 1115 GMT compared to 10,14 late on Tuesday and 10,1550 at open. It earlier touched an intraday low of 10.1875/dollar.

”It seems that we are stuck in a narrow range with lots of two-way business,” one trade said.

”Importers took the rand to its low levels (10,1875/dollar) but exporters moved right back, ” another trader said.

Traders said currency turmoil in Uruguay had brought some caution to the market, but the worries would be weathered.

”We expect that the rand will shrug off Uruguay because it continues to have support from local corporates,” another trader said.

Uruguay’s government temporarily halted activity at all banks on Tuesday to stop a crippling run on deposits, sparking a slide of more than 14% in the value of the peso.

Most traders believe that the rand will continue to trade in a range between 10,10-10,30 against the US unit for the time being — although some see it trending firmer while others expect it to weaken.

The rand has rallied by about 18% against the US unit this year, erasing most of its steep losses late in 2001, but has failed to hold below 10/dollar for any length of time. It hit a record low of 13.85/dollar on December 20.

Bonds edged firmer, driven by order-buying. The yield on the most traded R150 due 2005 was bid at 11,225% from 11,25% earlier and 11,30% on Tuesday.

The yield on the longer-dated R153 due 2010 was bid at 11,29% from 11,38% at close on Tuesday.

”There seems to be quite a bit of buying, mostly order-driven,” one trader said. ”We’ve seen a bit of buying towards the long end of the curve.” – Reuters