Johannesburg - The rand eased against the dollar in early
Wednesday trade and is likely to stay on the back foot as fears of contagion
from Europe’s liquidity problems dent investors’ appetite for higher yielding
but riskier emerging market assets.
Government bonds were up slightly in early trade, with
yields retreating after Reserve Bank data showed growth in private sector credit
demand braked more than expected in April.
The rand was at R8.3422 against the dollar by 06:45 GMT,
down 0.27% from Tuesday’s close at R8.32.
The ongoing financial troubles in the eurozone, with which
South Africa trades heavily, were likely to keep the rand under pressure,
Tradition Analytics said.
The euro fell to a two-year low, hurt by worries about
Spain’s soaring borrowing costs and expectations more money may be needed to
support its ailing banks.
“Europe is far from being fixed and until we see major signs
of either true reform or papered over reform the rand is likely to struggle to
make much headway,” Tradition Analytics said.
On the debt market, the yield on the three year paper shed
half a basis point to 6.385% compared with Tuesday’s close while that for the
14-year issue was flat at 8.345%.
Yields pulled back slightly after Reserve Bank data showed
credit demand by the private sector braked more than expected to 7.33%
year-on-year in April compared with a 9.16% rise in March, backing the argument
for further interest rate cuts to stimulate economic activity.
Rates are already at 30-year lows after a monetary loosening
cycle that ended in November 2010.