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Johannesburg - The rand softened against the dollar on
Friday and remained vulnerable to the risk aversion that has hit local and
other emerging markets due to worries that debt problems in Europe may trigger
another global recession.
Government bonds weakened, keeping yields within sight of
the multi-week highs scaled last week, as foreigners continue to dump South
African debt for assets offering lower returns but a greater degree of safety.
The yield on the four-year bond rose 10 basis points to
6.99% and that on the longer-dated 2026 issue climbed 9.5 basis points to
8.62%.
"We're still continuing to see a general risk-off trade
at this point and it's mainly driven by foreign selling. I think the 157s will
most likely push towards 7.0% today," WWC Securities head of bond trading
Marten Banninga said.
Foreigners have sold nearly R19bn of local bonds this month,
reversing a bullish trend in August when they snapped up nearly R11bn of paper.
With the year about three quarters over, net bond purchases
by foreigners have only amounted to R30bn compared to R52bn in 2010.
The rand was at R7.9950 against the dollar by 06:52 GMT,
down 0.18% from Thursday's close in New York.
The currency has recouped more than 1.7% against the greenback this week but is still down 14% since the start of September, weighed down by a flight from risk over worries about debt defaults in countries like Greece.
The currency is not out of the woods yet, as Germany's
approval of an extended eurozone bailout fund has only slightly eased investor
concerns about debt problems in Europe.
The currency has been trapped between R7.78 - R8.00 for the
past three days, but a close weaker than that range on Friday could set it up
for another bear-run to its 28-month low of R8.4950 hit on September 22.
"Overnight dollar gains have seen us trading to the top end, tracking other risky currencies that have maintained a negative bias," Rand Merchant Bank said in a note. "This is indicative of the continued stress in the system."
