Rand extends losses

2012-01-05 09:19

Johannesburg - The rand was on the back foot against the dollar on Thursday after shedding as much as 1.6% the previous session, with eurozone debt worries rekindling aversion towards emerging market assets perceived as carrying higher risk.

Government bonds added to the previous day's losses, with traders pointing to prospects of increased supply when the National Treasury resumes its weekly auctions next week after a brief hiatus for the just-ended festive holidays.

At 06:41 GMT the rand was at R8.1750 against the dollar, down 0.65% from Wednesday’s close at R8.1250.

It tracked the euro, the currency of South Africa’s main trading partner, which came under pressure as markets refocused on concerns about the eurozone debt crisis ahead of a French debt auction later in the session.

“The euro started the year fairly perky but seems to have lost its lustre a little bit and on the back of that, below R8.10 there seems to be fairly good demand for dollar/rand,” a Johannesburg trader said.

“I would imagine the rand is going to continue tracking the usual suspects, that is the euro and other emerging markets. If anything we could tend a bit weaker but maybe not at such a rapid pace,” he said, adding markets were starved of any domestic data or news at the moment to drive the currency.

On the debt market, bonds extended Wednesday’s losses, with the yields on the heavily traded 2015 and 2026 issues each adding 2.5 basis points to 6.875% and 8.66% respectively.

“Yields fell over the last two weeks with no liquidity and now it’s just sanity prevailing,” Investec bond trader Steve Arnold said.

“Also a slightly weaker rand and an announcement of next week’s bond auciton has seen a little bit of profit-taking,” he said.

The Treasury will offer R1.1bn of the 2018 government bond and R1.0bn of the 2031 paper next Tuesday.