South Africa’s rand weakened sharply against the dollar on Friday, just off a nine-and-a-half month low, as volatility prevailed on international markets, and traders said on Friday there was probably no respite for the unit on the horizon.
The local currency was trading at 7,58 versus the dollar at 07h10 GMT, about 1,9% weaker than its New York close. It reached 7,60/dollar overnight, its weakest level since early November last year.
The rand staged a mild recovery in New York, closing at 7,44/dollar. After the Asian markets opened, weaker stocks prompted investors to go back to the yen in earnest, further unwinding their carry trade positions.
It was also near a multi-year low against the euro, the currency of its main trading partner. It was last at 10,14 to the euro after hitting 10,1943 late on Thursday, its weakest level in nearly five years.
Dealers said it was likely to be a choppy session for the local unit, which will continue to be driven by international markets.
”We see a lot more volatility in the session. The Dow [Jones industrial average] was a bit flat last night but it’s the Asian markets that pummelled it,” said a locally based trader.
”It has been a trying week. We might start to see a bit of settling down for the weekend,” he said.
After trading around 7/dollar last Thursday, the rand has since plunged 7,2% and dealers are unsure when calm will return to the markets. The rand was not much influenced by the central bank’s decision on Thursday to raise rates by 50 basis points to 10%.
South African government bonds were weaker in line with the rand. Yields on the most-active 2010 bond were up five basis points to 9,385%, while those on the benchmark note due in 2015 went up four basis points to 8,61%. — Reuters