Rand slumps during correction

Johannesburg - The rand fell to a two-week low against the dollar in early Thursday trade, weakening for the third straight day as an expected technical correction could see the rand pull back from its high for the year.

The local unit hit its 2012 high of R7.52 a week ago but has since pulled back substantially, retracing to R7.81 so far this session.

Technical analysts say the dollar was oversold last week and with the corrective rally, a move towards R7.88 to R7.90, is likely.

The rand was at R7.8015 to the dollar by 06:40 GMT, down 0.51% on Wednesday’s R7.7620 close in New York.

“Technically, the break above the prior high and top of the bull flag formation at R7.7800 is significant,” research house Tradition Analytics said in a note to investors.

Also weighing on the rand is fading risk appetite as a bailout for Greece was postponed to next week, renewing concerns the country might not meet its debt redemption due in March.

The local calendar is empty this session and investors will focus on the eurozone debt crisis for direction. The rand’s current corrective trend is likely to remain for as long as the situation in Greece is unresolved.

Government bonds were weak on the negative risk sentiment, with the yield on 2015 bond up 5 basis points to 6.665% while that on the 2026 issue climbed 4 basis points to 8.305%.

“This morning, bond (yields) open up higher on weaker rand and negative sentiment out of the eurozone. We are close to upper resistance levels so it will take some big bad news to take us much higher,” said Steve Arnold of Investec Bank.

The market is also cautious ahead of the finance minister’s budget policy statement next week and any funding surprises that might come out of it.

Fixed-line operator Telkom [JSE:TKG], a private company with the government as its top shareholder, is likely to look at borrowing to fund a possible R4.5bn anti-trust penalty and refinance debt due in April.