The rand extended its losses on Tuesday, hitting its weakest level in seven weeks with investors still unnerved by equity outflows and a draft mining charter seen as bad news for existing domestic miners.
The volatile unit weakened by 16 cents from the previous close to 10,60 against the dollar — last touched on June 18 — before recovering to 10,58 at 0645 GMT.
Traders said that exporters were staying out of the market, depriving the rand of foreign currency flows from their overseas earnings which had supported the unit in the past two months.
”There is continued negative sentiment on the back of the new minerals bill — that combined with equity outflows we’ve seen over the past four weeks is hitting the currency,” a Johannesburg trader at a foreign bank said.
He said that if the 10,58/dollar level was decisively broken, the rand was likely to target 10,63, followed by 10,72/75.
For most of 2002, the currency has been recovering steadily from a historic 37% plunge against the dollar late in 2001, which took it to a record low of 13,85 on December 20.
But traders and analysts said on Monday that draft mining proposals aimed at giving blacks a bigger role in the white-dominated mining sector had fanned widespread concern that the value of the country’s top miners would be eroded.
Anglo American, the country’s biggest miner, has lost a fifth of its value since details of the bill first emerged on July 26.
Sliding prices for other shares has exacerbated concern over recent equity portfolio outflows, highlighted by central bank governor Tito Mboweni as a key reason for the rand’s volatility since early June.
Official data shows that foreigners have become net sellers of equities so far this year, offloading R809-million worth of shares — including R3,8-billion in the past two weeks.
This compares with purchases of R29,8 -illion in 2001. Other reasons cited for the selloff in the rand were general emerging market woes, particularly in Brazil and other Latin American markets.
The rand was relatively steady against the euro — the currency of its main trading partner — hovering at 10,32. But it slipped by another five cents to 16,45 against the pound.
The currency’s weakness continued to put pressure on benchmark government bonds, despite short supply. The yield on the benchmark R153 due 2010 was up five basis points at 11,38%, while the yield on the most traded R150 due 2005 rose two basis points to 11.36%. – Reuters