Johannesburg - The rand touched fresh multi-year lows against the dollar yesterday, as it remained one of the hardest-hit currencies in the emerging market sell-off by investors wary of risky assets.
Bond yields rose, with the yield on the benchmark R186 hitting a two-year high.
Failure to achieve a breakthrough in wage negotiations in the platinum sector, coupled with the general global downturn in risk appetite, helped push the rand nearly 1.5 percent weaker in intraday trade to R11.255 against the dollar, its softest level since late 2008.
But by 5pm the rand had clawed its way back to a bid level of R11.1298 to the dollar, still down 1.66c from the same time on Friday.
The FTSE/JSE Africa all share index closed 1.53 percent weaker at 45 750.7, but off a low for the day of 45 670.44. The benchmark Top40 index fell 1.55 percent to end at 41 090.64 after touching 41 007.07.
The MSCI emerging markets index slumped 1.7 percent, the most since August last year.
The Reserve Bank will hold the repo rate at a 30-year low when its monetary policy committee meets tomorrow, according to all 25 economists in a Bloomberg survey.
The combination of weaker Chinese manufacturing, political turmoil from Turkey to Thailand and the devaluation of Argentina’s peso has shaken investor confidence as the US Federal Reserve pares stimulus measures that have fuelled inflows into emerging markets.
“There are liquidity concerns globally,” said Simon Fillmore, the chief executive of Independent Securities.
“People who have cash in emerging markets are selling assets in emerging markets, selling risk assets and moving that cash into safe havens.”
John Cairns, a currency strategist at Rand Merchant Bank, wrote in a note to clients: “Markets are losing confidence in the emerging market universe as global monetary conditions tighten and as weaknesses in emerging markets get exposed.”
Rand moves “have been almost perfectly correlated with those in other high-yielding and troubled emerging market currencies”.
The yield on the R186 government bond, due in December 2026, jumped 11 basis points from Friday’s close to 8.66 percent, the highest close since January 2012. The shorter-dated R157 added 10.5 basis points to end at 6.565 percent.
Foreign investors sold R3.1 billion of South African bonds on Friday, bringing outflows this year to R12.8bn.
Non-residents also sold R229 million of equities, according to JSE data.
“Foreign selling of local bonds indicate the negative sentiment,” Cairns said. - Reuters and Bloomberg