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Markets

South Africa's loses ground vs dollar, looks abroad

  JOHANNESBURG : South Africa 's rand lost ground against the dollar on Wednesday and could trade with a weaker tone
11 Jan 2012

 

 JOHANNESBURG: South Africa's rand lost ground against the dollar on Wednesday and could trade with a weaker tone after failing to sustain levels below the key resistance area of 8.10 overnight.

In the absence of market-sensitive news locally, the rand will take direction from abroad, with the European Central Bank's meeting and debt auctions in Spain and Italy taking centre stage.

The rand hit 8.0625 late on Monday but retreated as importer buyers of dollar came in strongly.

Government bonds followed the rand weaker, reversing some of Tuesday's gains after a strong, first debt auction of the year. The yield on the 2015 bond ticked up 0.5 basis points to 6.815 percent and that on the 2026 issue rose by the same margin to 8.595 percent.

The rand was trading at 8.1255 to the dollar at 0630 GMT, 0.3 percent weaker than Tuesday's New York close of 8.1025.

"The rand has failed to sustain yesterday's gains due to apprehension surrounding tomorrow's Spanish and Italian bond auctions," Absa Capital said in a note.

"If the appetite for these auctions is poor, then risk aversion is likely to resume, while the dollar and other safe-haven assets are likely to continue strengthening."

The rand has been at the mercy of European developments in the past few months, losing about 22 percent against the dollar in 2011 as the euro zone debt crisis deepened.

Local stocks looked set to start on a slightly positive note, with the JSE's March futures contract up 0.08 percent before the start of trade at 0700 GMT.

Copyright Reuters, 2012