The rand extended its losses on Wednesday, pressured by mounting concern over Zimbabwe’s eviction of white commercial farmers and general jitters after key support levels were broken the previous day.
At 0640 GMT the rand was another 10 cents weaker from the previous close at 10,85 to the dollar, taking its losses over the past two days to 30 cents or nearly two percent.
”Its general negative sentiment and what’s happening in Zimbabwe is having a big effect,” a Johannesburg trader said.
”Now that we’ve broken the 10,80 level, stops have been triggered … we could go to 11,00 pretty quickly.”
Traders said on Tuesday that the rand came under pressure from news of a higher than expected jump in inflation during July, along with an unfounded rumour that a Fitch sovereign outlook upgrade had been issued in error.
”We’ve created a new range between 10,78 and 11,05 in the short term…but I don’t think we will weaken dramatically again overnight,” another trader said.
The rand’s recovery in 2002 after a historic plunge late last year has been curbed by a combination of regional and global concerns, limiting its gains in 2002 to just over 12 percent.
South African bond yields — which move in the opposite direction to prices — climbed in response to the weaker rand and news that the country’s main measures of consumer inflation all accelerated in July.
Yields on the benchmark R153 due 2010 climbed another seven basis points to 11,44%, while the most traded R150 gained eight basis points to 11,41%.
Statistics South Africa said on Tuesday that the annual increase in the CPIX index targeted by the central bank for monetary policy accelerated to 9,9% in July from 9,8% in June — the fastest since its January 1997 debut and above consensus forecasts of a 9,6% rise.
But most economists remained convinced that the Reserve Bank would hold its fire on interest rates after raising them by three percentage points so far in 2002 to quash inflation ignited mainly by the rand’s historic dive late last year. – Reuters