JOHANNESBURG: South Africa's rand slid more than 1 percent to a 21-day low against the dollar on Friday as political turmoil in Turkey made investors nervous about high-yielding but riskier emerging market assets.
Government bonds were not spared from the sell-off, with the yield for the benchmark 2026 note adding three basis points to 8.185 percent while that for the 2015 paper was up 2.5 basis points to 6.08 percent.
The rand hit a session low of 10.4800 per dollar, its weakest since Dec. 6, and recovered only slightly to 10.4400 by 1453 GMT, down from its previous close at 10.3550. "We have seen a lot of dollar buying due to Turkey.
Not that we have anything similar to that in South Africa, but we're getting hammered because we're in the same emerging market peer group," said Ion de Vleeschauwer, chief dealer at Bidvest Bank. "The volumes are very light, so the moves are exaggerated. People don't want to be around this time of the year because the moves are so volatile and so big that you can lose a lot of money quickly." The rand has fallen more than 23 percent against the dollar this year, after a series of strikes hit mining and manufacturing output in Africa's biggest economy, denting investor sentiment.
A yawning current account deficit of nearly 7 percent of GDP, traditionally plugged by foreign flows into the debt market, make the local currency additionally vulnerable during bouts of global risk aversion.
The rand has recorded the second biggest fall against the dollar this year - after Indonesia's rupiah - in a basket of 20 emerging market currencies monitored by Reuters.
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