The rand opened a touch softer on Tuesday, still pressured by a stronger dollar, with attention fixed firmly on August consumer price data due at 0930 GMT, likely to provide clues to the interest rate outlook.
At 0650 GMT the rand was trading three cents weaker than its Johannesburg close at 10,73 against the US unit, after touching 10,75 earlier.
”With the euro looking a bit soft we might see more weakness, if it breaks 10,80 it looks ready to go higher but if it stays below we should see profit taking at the end of the week,” a trader said.
The euro — the currency of South Africa’s main trading partner — weakened sharply this week as the dollar climbed against the ailing yen.
News late on Monday that Iraq would admit UN inspectors without conditions, easing fears of a US attack on the country, helped boost the dollar to a three-month high against the Japanese unit and eke out further gains against the euro.
The rand shed 20 cents against the dollar on Monday on worries over the likely impact on emerging markets of another Mideast war, along with concern over the possibility of further rate hikes if domestic prices continue to climb.
Consensus forecasts show that the bank’s targeted CPIX index is likely to have surged by 10,5% in the year to August, after a 9,9% increase the previous month.
Anything worse than that will fan fears that the central bank could raise interest rates again after hiking its key repo rate by 100 basis points for the fourth time this year last week, taking it to 13,50%.
Bonds also softened a bit further ahead of the data, with the yield on the benchmark R153 due 2010 up four basis points at 11,82%. Yields on the R150 due 2005 were unmoved at 12,17%. – Reuters