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Rand under pressure amid portfolio outflows

Jan 30 2013 09:29 Reuters
Rands

(File) (Shutterstock)

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Johannesburg - The rand struggled to regain strength after hitting a four-year low earlier this week and is likely to remain under pressure due to foreign bond holders exiting the market.

The rand was at R9.0434/$ at 08:43, slightly weaker than its close in New York on Tuesday.

Portfolio outflows of up to R4bn ($443m) from the bond market since mid-January have weighed on the currency, while labour unrest has also fuelled negative sentiment about Africa's largest economy.

"Portfolio outflows from the local bond market remain a real concern, given that we have seen R4bn of outflows since mid-January," analysts at Absa Capital wrote in a note published on Wednesday.

"Further capitulation by these foreign bond holders likely would result in extended rand weakness and could create a reinforcing spiral for both the rand and South African bond market in the near term."

Government bonds continued to soften and the yield on the 2026 paper edged up 3 basis points to 7.495% while that on the 2015 issue was 2 basis points higher at 5.435%.
 

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