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Johannesburg - The rand extended losses against the dollar on Thursday, falling more than 2.1% and in tandem with local and global stocks, which were slammed by renewed world growth worries.
Government bonds strengthened and the yield on the 4-year issue hit
a new all-time low of 6.67% as foreign investors snapped up local debt,
which still offers better returns than those in developed countries.
The rand traded at R7.2285/$ in afternoon trade, after earlier hitting a
session low of R7.2505/$ Wednesday’s close at R7.0927/$. The rand ranked in the
bottom five in a basket of 20 emerging market currencies monitored by Reuters.
The currency’s fall mirrored that of the local bourse, where the
blue chip index was down 3.5%, with resource stocks leading the decline.
“We have seen a massive move on the global equities side, and,
despite the fact that we have not seen any sign of capitulation on the fixed
income side yet, I think that the equities outflow is once again taking its toll
on FX,” said Luis Costa, head of CEEMEA forex and debt strategy at Citi in
London.
Analysts said because South Africa’s bourse is liquid, with heavy
penetration from international accounts, this makes it vulnerable to global
moves that also hit the rand.
“I think equities now are definitely the centre of the hurricane
here. For the moment the dynamics in global equities ... look pretty horrible
and there could be more losses on the rand from equity contagion,” Costa said.
