S.Africa’s rand hits 6-mth low, targets 8.60/dollar
South Africa’s rand hit a fresh six month low against the dollar early on Thursday before recouping some of its losses but could resume a slide towards 8.6 as Europe’s debt woes drive investors away from emerging market assets to perceived safer havens.
The local unit fell to 8.58 to the greenback, its weakest since late November, before clawing back some ground to 8.5330 by 0650 GMT.
“There is a possibility of some pull-back as exporters step in this morning but the real core of the matter still remains this massive uncertainty in Europe and risk-off associated with that,” said market analyst Quinten Bertenshaw of ETM.
” The core focus for most people is to stay long dollars so I would suggest that any dips back towards 8.40 will bring back the buyers with an eventual target of 8.60,” he added.
Governor Gill Marcus again ruled out any central bank intervention to support the rand late on Wednesday, saying using foreign exchange reserves to do this would not be good use of the money.
“If you take that path, you’ve got to have very deep pockets. We don’t think it is good use of our money. It is very expensive,” Marcus told a forum.
On Thursday, traders said the market would only pay passing attention to domestic producer inflation and trade data for April, which should largely confirm price pressures are fairly benign, while problems in Europe, a key trading partner for South Africa, continue to constrain local exports.
Government bonds were weaker, with the yield on the three year benchmark rising 2.5 basis points to 6.435 percent and that for the 14-year issue adding three basis points to 8.405 percent.Reuters