JOHANNESBURG: The rand was weak against the dollar in early Wednesday trade as investor sentiment soured due to inceasing worries about debt troubles in Europe and the United States and a controversial secrecy law in South Africa seen as hurting confidence.
The currency's fall and a deteriorating inflation outlook have pushed yields on government debt higher as prices drop.
The rand hit a session low at 8.4350 to the dollar, which is 0.56 percent weaker than its close during the New York session on Tuesday.
The 2011 mark of 8.4950 is the next major barrier. The last time the rand was weaker than that level was mid-2009.
"All bets are off on how much higher the rand could weaken. Technical analysis shows that a bull flag formation on the weekly chart might target levels back above 9.0/dlr should it unfold," Tradition Analytics said in a research note.
October consumer inflation numbers will be out at 0800 GMT and economists in a Reuters survey expect the year-on-year number to rise to 5.9 percent from 5.7 previously.
The central bank reiterated late on Tuesday that cost-push pressures and the rand's deterioration posed an upside risk to the inflation outlook, saying inflation was more likely to exceed, than undercut, official targets.
An inflation outlook seen as reducing rate-cut expectations, a week rand and the passing on Tuesday of a state secrecy bill that worries investors who fear it could make it easier for the government to hide corruption have contributed to rising yields on government debt.
The yield on the 2015 benchmark bond added 4.5 basis points to 6.965 percent and could test the area between 7.10 and 7.20 percent, the August high.
Comments
Comments are closed for this article.