JOHANNESBURG: South Africa's rand weakened in early trade on Thursday, extending an overnight fall in New York after the US Federal Reserve signalled an end to its stimulus programme, which has boosted appetite for high-yielding emerging market assets.
The rand was at 10.2455 against the dollar at 0641 GMT, 0.54 percent weaker than its New York close and a sharp drop from 9.91, its firmest level in Johannesburg afternoon trade on Wednesday.
The US central bank confirmed on Thursday that it was getting closer to winding down its $85 billion monthly asset purchases, the source of dollars flooding into risky assets such as the rand and South African domestic bonds.
"With clarity on the Fed's exit strategy, the question is now on the longer-term fallout," Rand Merchant Bank said a note.
"Let's give the market a few days to fully settle but it seems pretty clear that the upside risks on rand have grown meaningfully after last night."
The rand is also vulnerable to domestic factors as workers in key sectors of the economy such as mining and manufacturing gear up for wage talks that could lead to strikes over the next few weeks.
Government bonds strengthened, adding to the previous session's gains after consumer inflation eased and the current account deficit shrank, against expectations.
The yield on the benchmark 2026 issue fell 13 basis points to 7.895 percent. The yield on the 2015 issue dropped 14.5 basis points to 6.105 percent.
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