Johannesburg - The rand tumbled nearly 3% to hit 16-month lows against the dollar on Wednesday as importers piled into the greenback, spooked by a recent trend of sharp declines that dealers said would continue.
In the early evening, the rand was trading at R7.8720/$, 1.7% weaker than Tuesday’s New York close of R7.74 and having hit R7.9650, its weakest since May 2010.
With over 5% of losses so far this week, the rand was on track to register its biggest weekly decline since May 2009.
“Importers.... are panicking and any order is moving the market aggressively,” said Ion de Vleeschauwer, dealer at Bidvest Bank.
The rand has broken through several key technical levels this week and will likely hit 8.00 to the dollar soon.
“We have hit 7.9650 already so I think 8.00 could come under pressure and not hold. Sentiment for the short term has turned very bearish,” said Judy Padayachee, a technical analyst at Absa Capital who sees it at 8.10/8.20 over the next few days.
“All my daily and weekly indicators are screaming the rand is oversold, but I have to ignore that and look at the price action, which shows it is under pressure and the trend is still weaker for now.”
The rand was also at its weakest levels since January 2010 against the euro and sterling. A reprieve is unlikely in the short term, given that investors are shunning risky positions in view of the deepening eurozone debt crisis.
The sharply weaker rand has created a monetary policy headache for the South African Reserve Bank as it tries to make a trade-off between rising inflation and weak growth.
But the central bank is still expected to keep its repo rate unchanged at 5.5% when it announces a decision on borrowing costs on Thursday.
Data showed earlier that annual headline inflation was steady at 5.3% in August, but it is expected to rise gradually over the next few months and peak at 6.3% in the first quarter of 2012.
Government bonds firmed after consumer price index data were softer than expected, with the yield on the 2015 bond down two basis points to 6.85% on the day and that on the 2026 issue falling by the same margin to 8.395%.
For now, money markets are still pricing in a small chance of a rate cut over the next few months, with the 6x9 FRA (forward rate agreement) rate at 5.21% on Wednesday after rising to 5.4% on Tuesday.
But analysts say the inflation outlook has deteriorated and instead of a rate cut, rates will be stable for longer.
In the early evening, the rand was trading at R7.8720/$, 1.7% weaker than Tuesday’s New York close of R7.74 and having hit R7.9650, its weakest since May 2010.
With over 5% of losses so far this week, the rand was on track to register its biggest weekly decline since May 2009.
“Importers.... are panicking and any order is moving the market aggressively,” said Ion de Vleeschauwer, dealer at Bidvest Bank.
The rand has broken through several key technical levels this week and will likely hit 8.00 to the dollar soon.
“We have hit 7.9650 already so I think 8.00 could come under pressure and not hold. Sentiment for the short term has turned very bearish,” said Judy Padayachee, a technical analyst at Absa Capital who sees it at 8.10/8.20 over the next few days.
“All my daily and weekly indicators are screaming the rand is oversold, but I have to ignore that and look at the price action, which shows it is under pressure and the trend is still weaker for now.”
The rand was also at its weakest levels since January 2010 against the euro and sterling. A reprieve is unlikely in the short term, given that investors are shunning risky positions in view of the deepening eurozone debt crisis.
The sharply weaker rand has created a monetary policy headache for the South African Reserve Bank as it tries to make a trade-off between rising inflation and weak growth.
But the central bank is still expected to keep its repo rate unchanged at 5.5% when it announces a decision on borrowing costs on Thursday.
Data showed earlier that annual headline inflation was steady at 5.3% in August, but it is expected to rise gradually over the next few months and peak at 6.3% in the first quarter of 2012.
Government bonds firmed after consumer price index data were softer than expected, with the yield on the 2015 bond down two basis points to 6.85% on the day and that on the 2026 issue falling by the same margin to 8.395%.
For now, money markets are still pricing in a small chance of a rate cut over the next few months, with the 6x9 FRA (forward rate agreement) rate at 5.21% on Wednesday after rising to 5.4% on Tuesday.
But analysts say the inflation outlook has deteriorated and instead of a rate cut, rates will be stable for longer.