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Greek euro worries pressures rand

May 25 2012 19:13

Johannesburg - Uncertainty over the future of the euro zone returned to push the South African rand down against the dollar on Friday, a day after a widely expected central bank decision to keep domestic rates on hold.

Government bonds closed little changed from previous levels, following Thursday's rally after the Reserve Bank sounded a dovish tone on inflation, raising the prospect of interest rate cuts later this year.

The yield for three year paper was steady at 6.35 percent and that for the longer-dated 2026 issue shed a basis point to 8.315 percent.

The rand was at 8.3825 to the dollar by 16:27 GMT, 0.24% off Thursday's close at 8.3625.

The rand has fallen nearly eight percent against the dollar since the start of May, on track for its biggest monthly loss since September last year on renewed risk aversion as fears of contagion from a possible Greek exit from the euro zone mount.

These fears, and the risk that other debt-plagued countries could also leave the bloc, pushed the euro to nearly two-year lows against the dollar on Friday and emerging market currencies did not escape unscathed.

"It's still risk aversion, there's still uncertainty because of the debt levels and there hasn't really been any consensus (about a resolution)," said Brigid Taylor, head of institutional sales at Nedbank.

"Unfortunately that bodes ill especially for commodity based currencies like the rand, with the commodities coming off. The rand has tried to test up to 8.40 again but it hasn't managed so it's sort of stuck within that range of 8.32/40 for now."
rand  |  dollar  |  currencies


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