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Johannesburg - The rand weakened for the third straight day against the dollar on Tuesday, tracking global markets depressed by Europe's inability to sort out its debt crisis.
The South African Reserve Bank (Sarb) will be considering the impact of sliding investor confidence in emerging markets and other factors likely to affect growth and inflation when the bank's officials meet for the first day of monetary policy deliberations during the session.
The rand gave up 0.4% to R7.9656 in early trade, still fluctuating within its two-month range. It closed at R7.9325 in the New York on Monday.
"I'm seeing R7.70 and R8.20 - those two levels marking a breakout of the rand's range. With the MPC (monetary policy committee meeting) on Thursday there's a lot of volatility and uncertainty in the market still,” said Judy Padayachee, technical strategist at Absa Capital.
The R7.70 and R8.20 levels are the last two weeks’ high and low respectively.
The Sarb will announce its decision to either adjust or hold the repo rate at about 13:00 GMT on Thursday.
While most economists surveyed by Reuters expect the rate to hold steady, the bond and futures markets have priced in a chance that the bank will cut the rate at which banks borrow from it.
The front end of the bond yield curve, most sensitive to interest rate movements, has outperformed the back end as the market increasingly prices in chances of a cut in rates, especially after a European central bank cut last week.
Yields on the benchmarks were steady at 6.45% on the 2015 and 8.29% on the 2026 bonds, while the market waits for weekly auction results of R1bn of the 2026 issue and R1.1bn of the 2020 bond out after auction closes at 09:00 GMT.
The R186/R157 spread differential is trading slightly higher than the record 184 basis points close on Monday, steepening as the two benchmark bonds react to the rate cut expectations.
