The rand weakened against the dollar on Tuesday, tracking losses in the euro, but should find some support during the session from firmer global equity markets, traders said.
At 7.08am GMT the rand traded 1,76% softer at R10,34 versus the greenback after closing in New York on Monday at R10,1615. The rand earlier touched a session high of R10,02.
The rand’s fall mirrored that of the euro, the currency of South Africa’s major trading partner, which fell to its lowest in one-and-a-half years against the dollar.
”The dollar has rallied quite significantly especially against sterling and the euro, which is one of the reasons why the rand seems to be struggling at bit,” a Johannesburg trader said.
Analysts say South Africa’s yawning current-account deficit of more than 7% of GDP renders the rand more vulnerable than other emerging-market currencies to the prevailing global credit crisis with its roots in the United States subprime market.
The rand should, however, find support on Tuesday from stronger global equities, said Bidvest Bank chief dealer Ion de Vleeschauwer.
”I do think there will be some support for the currency closer towards the R10,30 level because of the strong rally in the equity market. That will probably cap the rand weakness for now,” he said.
Market eyes are on Finance Minister Trevor Manuel’s Medium-Term Budget Policy Statement at 2pm local time for pointers on any economic policy change and adjustments to growth forecasts, traders said.
Like the rand, government bonds were weaker, and yields rose, with the benchmark 2015 yield up 6,5 basis points at 9,42%, while the yield for the 2036 note added five basis points to 8,75%. — Reuters