JOHANNESBURG: South Africa's rand was on the backfoot against the dollar early on Friday and was poised to close the week at its weakest level in two and a half years as investors filed out of emerging markets they perceived as risky.
Government bonds are being sold off in the bleak trading environment.
The rand fell to a new 2011 low this week at 8.61 to the dollar, and a deteriorating outlook for the global economy is pushing risk-averse investors into short-term and traditionally haven securities such as the dollar.
By 0630 GMT, the rand had lost 0.6 percent to 8.5419 to the dollar, from a 8.4910 close on Thursday.
Yields on government paper were at seven-month highs at 8.725 percent on the 15-year issue and the four-year bond was testing the psychologically key 7 percent area.
Auction results of inflation-linked bonds are due at 0900 GMT and yields are likely to continue the lower trend as inflation hit the central bank's target at 6 percent in October.
"Bets are off at the moment. We're seeing a lot more scurrying for safety," said Paul Chakaduka of Global Trader.
"The biggest worry is Germany failing to get a subscription for their bonds. It was very disappointing and in that a lot of people have indicated they're looking for higher yields but not looking to take on any further risk on sovereign debt until a solution in Europe, Chakaduka said.
German bond prices rose this week after a poorly subscribed indicated that investors are wary of debt from one of Europe's firmest economies.
Finance Minister Pravin Gordhan and deputy Nhlanhla Nene are due to speak at around 1730 GMT and could give insights on South Africa's economic prospects in light of the euro zone credit crisis.
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