South Africa’s rand fell to a four-and-a-half month low to the dollar on Wednesday, and some traders said the rand could weaken even further as investors unload risky assets.
At 06h40 GMT the rand stood at 7,39 to the dollar, 0,6% weaker than its previous New York Close. It touched a low of 7,4120 earlier, a level last hit on March 21, according to Reuters data.
Traders said the unit was likely to be volatile in the session. ”I think we should brace ourselves for weaker levels on the currency. Everybody is so worried that they don’t want anything risky in their books, and South Africa is very risky,” said Ion de Vleeschauwer, chief dealer at Rennies Bank.
Global investors remained nervous as problems from the US credit market spread to the rest of the world, with major bourses falling.
Emerging markets fell overnight as investors reversed their positions in high-risk markets and traders said this is likely to continue in the session.
”Some people said this [rand weakness] was overdone last week, but I can’t see it stopping. It will get worse before it gets better,” de Vleeschauwer said.
Local markets are waiting for a central bank decision on interest rate on Thursday. The Reserve Bank is widely expected to raise its repo rate by 50 basis points to 10%, adding to 250 basis points in increases since June last year.
”Hopefully we can concentrate on tomorrow [Thursday], but I don’t see where the good news is going to come from,” said Jim Bryson, dealer at Rand Merchant Bank. ”If the Dow [Jones] futures come under pressure, then the rand will remain under pressure, but it is still a nervous market.”
South African government bonds opened weaker on Wednesday, with yields on the most-active 2010 bond up six basis points to 9,345%, and those of the benchmark 2015 bond up by the same margin to 8,575%. — Reuters