JOHANNESBURG: South Africa's rand started the week on the back foot against the dollar in early Monday trade, as the euro came under pressure and a bleak outlook for commodity-linked currencies clouded an already dim global growth picture.
The rand is expected to come under heavier pressure as the week wears on, along with other commodity-weighted currencies as global growth is at risk again after poor U.S data on Friday and perpetuating debt problems in the euro region.
The rand is coming off a three-week high hit on Thursday and attempting to make a convincing break of support at 7.08 -- a level the currency has attempted, but failed at, for the past four sessions.
Liquidity will be thin, especially in the afternoon as the United States market is away on a national holiday.
By 0638 GMT, the rand was trading at 7.099, down on Fridays' New York close of 7.082 as investors showed a preference for the firmer dollar.
"This morning, the market is opening with a lot stronger dollar and a weaker euro that kind of set the tone for this week," said Ion de Vleeschauwer of Bidvest Bank.
We're already seeing some early demand here for dollars, so I think the rand will have a tough week this week. The equity markets are still relatively weak, so we are seeing pressure on emerging market currencies that will probably remain," he said.
Government bonds were supported by the weak growth picture both locally and globally, fuelling hopes of a domestic interest rate cut in three week's time when the central bank meets to deliberate monetary policy.
The yield on the 2015 bond was steady at 6.37 percent while the 2026 issue gave up 1.5 basis points to 7.91 percent.
The stock market looked to open weaker on Monday after dropping to its lowest in two weeks on Friday. The JSE futures contract of blue-chip stocks fell 1.3 percent before trade begins at 0700 GMT.
Manufacturing data due on Thursday will be the focus for investors, where expectations are for a weak number after the purchasing managers' index remained in contraction in August. Reserves numbers, the Reuters Econometer and the monthly business survey are also on the calendar for the week.
Copyright Reuters, 2010
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