Rand touches 6-week lows as investors fret over economy

Johannesburg - The rand fell to its weakest in six weeks against the dollar on Tuesday, underperforming most of its emerging market peers as investors fretted over the ailing economy and the persisting threat of credit rating cuts.

Analysts said the economy was not yet out of the woods after dodging a downgrade from Moody's last Friday, with Fitch and Standard & Poor's set to do their own reviews over the next couple of weeks.

The rand has been among the hardest hit emerging market currencies as the outlook for the global economy has turned cloudy, whittling investors' appetite for riskier assets.

The rand fell more than 1% to R15.3700/$, the softest it has been March 29, and was down 0.6% at R15.2800/ by 13:55.

"It seems like a continuation of the sell-off in the local unit that we have seen in recent sessions. Rand sentiment is still quite weak," ETM market analyst Jana van Deventer said.

"The market is not convinced that the efforts from government and business is entirely enough to prevent more negative credit ratings action."

Moody's, which had placed South Africa on review for a downgrade, maintained its rating at two notches above sub-investment grade on Friday, in what the government has touted as recognition for its efforts with business and labour to tackle constraints to growth.

READ: SA dodges Moody's credit rating downgrade

But data on Monday showing a increase in unemployment to its highest since 2008 doused most of the optimism.

The chronically high unemployment rate is likely to feature in the Treasury's meetings Fitch and S&P within the next couple of weeks.

READ: Unemployment soars, hits highest rate since 2008

Government bonds took their cue from the weaker rand on Tuesday, and the yield on debt maturing in 2026, the benchmark for the secondary market, rose as much as 10 basis points to 9.245%.

READ: Dual-listed shares shine on the JSE

Stocks however held their ground on Tuesday, tracking a global rally which was prompted by solid corporate earnings in Europe.

The JSE securities' exchange's Top 40 index was up 0.9%.