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Johannesburg - The rand extended losses against the dollar on Wednesday, tumbling nearly 3% to 16-month lows as importers spooked by its sharp losses in recent days bought greenback in a panic.
Persistent worries about the sovereign debt crisis in the eurozone also added to the rand's bearish tone, with market players betting the rand could fall to the psychologically key level of R8.00/$ in the next few days.
The rand has lost more than 5% to the dollar so far this week, its fall exaggerated by thin liquidity conditions as some players stayed on the sidelines, unwilling to take positions given the extreme volatility.
"Exporters don't want to sell rand at the moment because it has weakened so much so quickly - they are waiting for 8.00/dollar," said Ion de Vleeschauwer, a dealer at Bidvest Bank.
"Importers, on the other hand, are panicking and any order is moving the market aggressively," he said, adding 8.00/dollar was possible over the next few days, especially because the worsening eurozone debt crisis is weighing on sentiment.
The rand was trading at R7.89/$ in afternoon trade, 1.54% weaker than Tuesday's New York close of R7.74. It hit R7.9650, its weakest since late May 2010.
The rand has lost 20% in the past 55 days, comparable to 65% it lost in 81 days in 2008 at the start of the financial crisis after the collapse of Lehman Brothers.
The rand's sharp depreciation is likely to weigh on the Reserve Bank as it deliberates on interest rates and what impact it will have on inflation over the next few months. Data showing inflation was steady in August, leaving room for an interest rate cut over the next few months, added to the rand's woes.
Money markets see a small probability of a repo rate cut from 5.5% in the next few months, with the 6x9 FRA (forward rate agreement) at 5.21%. But analysts said the outlook was way too uncertain for the Reserve Bank to even consider future monetary loosening.
Persistent worries about the sovereign debt crisis in the eurozone also added to the rand's bearish tone, with market players betting the rand could fall to the psychologically key level of R8.00/$ in the next few days.
The rand has lost more than 5% to the dollar so far this week, its fall exaggerated by thin liquidity conditions as some players stayed on the sidelines, unwilling to take positions given the extreme volatility.
"Exporters don't want to sell rand at the moment because it has weakened so much so quickly - they are waiting for 8.00/dollar," said Ion de Vleeschauwer, a dealer at Bidvest Bank.
"Importers, on the other hand, are panicking and any order is moving the market aggressively," he said, adding 8.00/dollar was possible over the next few days, especially because the worsening eurozone debt crisis is weighing on sentiment.
The rand was trading at R7.89/$ in afternoon trade, 1.54% weaker than Tuesday's New York close of R7.74. It hit R7.9650, its weakest since late May 2010.
The rand has lost 20% in the past 55 days, comparable to 65% it lost in 81 days in 2008 at the start of the financial crisis after the collapse of Lehman Brothers.
The rand's sharp depreciation is likely to weigh on the Reserve Bank as it deliberates on interest rates and what impact it will have on inflation over the next few months. Data showing inflation was steady in August, leaving room for an interest rate cut over the next few months, added to the rand's woes.
Money markets see a small probability of a repo rate cut from 5.5% in the next few months, with the 6x9 FRA (forward rate agreement) at 5.21%. But analysts said the outlook was way too uncertain for the Reserve Bank to even consider future monetary loosening.
