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Johannesburg - The rand hit a new eight-week low to the dollar
on Monday and could stay on the back foot, in line with softer metal prices and
a battered euro.
The currency recorded its worst weekly performance in a year
last week and was among the worst performers compared with its emerging market
peers.
It pierced through the psychologically key R7.00 to the
dollar on Friday. Charts suggest it is on a weakening trend and the March
low of R7.2150 is on the cards.
The rand was trading at R7.0250 against the dollar at 06:36
GMT, from Friday's New York close of R7.01. It hit a new eight-week low of
R7.0605 earlier.
The euro, the currency of South Africa's largest trading
partner, was languishing near seven-week lows to the dollar as IMF chief
Dominique Strauss-Kahn was charged with sexual assault on the weekend,
increasing uncertainty on aid for Greece and other indebted eurozone countries.
"The weekend did not calm market nerves - leaving the
rand vulnerable to further losses," said Rand Merchant Bank in a note.
"The dominance of euro/dollar in driving the market
implies there are large two-way risks on dollar/rand. Our take though is that
the risks are clearly biased towards losses," it said, seeing a bit of
rand support at R7.20.
Also weighing on the rand were weaker commodity prices
including gold, a key South African export.
South African government bonds also weakened, with the yield
on the 2015 bond R157 up two basis points to 7.75%, and that on the 2026 issue
R186 rising by the same margin to 8.705%.
The market will focus on April consumer price index (CPI) data out on Tuesday,
which is expected to show inflation quickened slightly to 4.4% year-on-year
from 4.1% in March.
A higher-than-expected CPI outcome could weigh on bonds as
the market prices in an earlier than expected rate hike.
