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Johannesburg - The rand was weak against the dollar in early
Wednesday trade as investor sentiment soured due to increasing worries about
debt troubles in Europe and the United States and a controversial secrecy law
in South Africa seen as hurting confidence.
The currency’s fall and a deteriorating inflation outlook have pushed yields on government debt higher as prices drop.
The rand hit a session low at R8.4350 to the dollar, which
is 0.56% weaker than its close during the New York session on Tuesday.
The 2011 mark of R8.4950 is the next major barrier. The last
time the rand was weaker than that level was mid-2009.
“All bets are off on how much higher the rand could weaken. Technical analysis shows that a bull flag formation on the weekly chart might target levels back above R9.0/dollar should it unfold,” Tradition Analytics said in a research note.
October consumer inflation numbers will be out at 10am and
economists in a Reuters survey expect the year-on-year number to rise to 5.9%
from 5.7% previously.
The central bank reiterated late on Tuesday that cost-push
pressures and the rand’s deterioration posed an upside risk to the inflation
outlook, saying inflation was more likely to exceed, than undercut, official
targets.
An inflation outlook seen as reducing rate-cut expectations,
a week rand and the passing on Tuesday of a state secrecy bill that worries
investors who fear it could make it easier for the government to hide
corruption have contributed to rising yields on government debt.
The yield on the 2015 benchmark bond added 4.5 basis points to 6.965% and could test the area between 7.10% and 7.20%, the August high.
