South Africa’s rand opened weaker on Wednesday after breaking for a national holiday, and looked nervously to producer inflation data to be released at 0930 GMT, traders said.
At 0720 GMT the rand was trading at 10,74 to the dollar, hovering just above its lowest level for four months and weakening by eight cents since Monday’s Johannesburg close.
South African financial markets were closed for a public holiday on Tuesday.
Traders said they were expecting bad news for South Africa’s economy from producer inflation data released, although some of that fear had been factored into the rand’s price.
A Reuters poll forecast the producer price index (PPI) creeping up to 15,3% from 15,2% in July.
Concerns over possible war in Iraq, that sent global stocks scurrying downwards on Tuesday, would also bear down on the rand during the day, they added.
”There is a whole lot of nervousness in our markets,” said one Johannesburg-based trader. ”If the US and Britain get together to club Iraq, then oil will blow up,” he added.
Oil price rises have been one of the biggest contributors to South Africa’s rising inflation.
International markets’ concerns would be reflected in a capital flight away from perceived risk, and into ”safe-bet” investments, such as US Treasuries and gold, traders said.
That would leave emerging market positions open to further losses.
Market players said they expected the rand to trade in a new range between 10,65 and 10,75 to the dollar, but said trade would be likely to remain thin.
They added that bond market prices would also be sluggish.
The benchmark R153 bond, due 2010, yielded 11,94% at 0700 GMT, up from 11,89% at its close on Monday, while the yield on the R150, due 2005, was bid six basis points higher at 12,39%. – Reuters