Johannesburg - The rand weakened against the dollar early on Wednesday with bears looking to push the South African currency past a two-week low although trade would be influenced by inflation data due later in the session.
The rand hit a two-week low of 10.4775 to the dollar on Tuesday, breaking support at 10.45 after trying for three sessions, as appetite globally for riskier emerging market assets was dampened by worries about the outlook for global growth and political instability in Ukraine and Thailand.
Concerns about mining strikes in South Africa also weighed.
The currency opened weaker than 10.45 on Wednesday, signalling rand bears could have further room to go.
It was trading at 10.4700 to the dollar at 08:20 SA time on Wednesday, after closing in New York at 10.4400.
“The rand bears are staging a comeback,” said Judy Padayachee, technical strategist at Barclays Africa.
“We are watching for follow-through on the moves posted yesterday.
For dollar/rand, the peek above 10.45 is a step in the right direction given our three-month view of 11.75.”
However, investors are likely to play it safe until the release of April consumer inflation data, due at 10:00 SA time.
Economists polled by Reuters expect inflation remained steady at 6 percent, the ceiling of the central bank's 3-6 percent target.
The inflation data comes a day before the South Africa Reserve Bank announces a decision on interest rates.
The rand has recovered some of the losses incurred at the start of the year during a slump in emerging market assets, which prompted the Reserve Bank to unexpectedly raise interest rates by 50 basis points to 5.5 percent.
It is now trading at stronger levels than it was at the time of the Monetary Policy Committee's last rate-setting meeting in March.
Analysts say this has moderated inflation expectations, and gives the central bank room to keep rates steady at Thursday's meeting to help support the economy, even though the bank has said interest rates will rise in future.
If April inflation is above expectations, the rand is likely to claw some gains in this session as rate hike expectations would increase.
Yields on government bonds were flat at 8.205 percent on the benchmark 2026 issue and nudged down half a basis point to 6.705 percent on the 2015 note. - Reuters