Publications
Partners
Johannesburg - The rand fell to its weakest in nearly four weeks against the dollar on Wednesday and was expected to remain on the back foot as investors worried about the spread of the debt crisis to other countries in the eurozone.
As a heavily traded currency, the rand has been volatile since September, gyrating widely in line with changing sentiment towards riskier assets.
Government bonds were weaker in line with the rand, although yields had retreated from multi-week highs in a knee-jerk reaction to Reserve Bank governor Gill Marcus' comments that inflation targeting was the bank's focus.
Stocks looked set for a lower start in line with global markets. The JSE's Top 40 - (Tradeable) [JSE:J200] December futures contract was down 0.63% before the 07:00 GMT start of trade.
The rand was trading at R8.22 to the dollar at 06:35 GMT, 0.58% weaker than Tuesday’s New York close of R8.1725. It hit R8.2303, its weakest since October 21.
“The optimism seen earlier in the week that the change in governments in Italy and Greece would ensure a return to fiscal health seems to have evaporated, along with appetite for risky assets,” said Standard Bank in a note.
“As the currency has already reached our short-term target of R8.20, a sustained breach of this level could see the rand head to R8.29, possibly as far as R8.40, if risk aversion rose further.”
After recovering from a 28-month low of R8.4950 hit in September, the rand tried and failed several times to pierce resistance at R7.80 convincingly, thus remaining vulnerable to further losses.
Focus on Wednesday will also be on September’s retail sales data at 11:00 GMT, with the market expecting a 6.3% annual rise in sales from 7.1% in August.
Should the data come out higher than expected, it could provide relief for the rand, Standard Bank said.
On bonds, the yield on the 2015 bond was up two basis point to 6.85%, off a six-week high of 6.94% hit on Tuesday. The 2026 yield went up four basis points to 8.525%, also off six-week highs.
