Rand softer amid growth outlookComment on this story
Johannesburg - South Africa's rand touched a fresh five-week low against the dollar on Monday, held back by a weak economic growth outlook both on the local front and in euro zone, a key export market.
Government bonds, however, edged higher, with yields retreating after the Organisation for Economic Co-operation and Development said South Africa had room to ease monetary policy further to help boost growth.
The yield on the 2026 paper ended the day two basis points lower at 7.375 percent while the paper due in 2015 dipped 2.5 basis points to 5.335 percent.
The rand hit a session low of 9.1161 to the greenback, its weakest since January 29, and was at 9.0970 by 15h57 GMT compared with Friday's close 9.0750.
The rand is now within sight of this year's low of 9.16, a breach of which would easily take it towards the next key support at 9.25, a level last seen in April 2009.
“The trend is certainly for further rand weakness at present,” Tradition Analytics said in a market note, but added:
“Lack of momentum past 9.1200 could see the potential for a move higher unravel quite quickly again.”
The OECD report likely rekindle the debate on further monetary loosing, especially after Minister Pravin Gordhan last week cut GDP growth forecasts for the next three years.
Despite growth remaining sluggish after a recession in 2009, the South African Reserve Bank has kept the benchmark repo rate at 5.0 percent since reducing it by 50 basis points last July, citing rising inflationary pressures.
“The macroeconomic policy mix has been insufficiently supportive of growth while allowing large budget deficits to persist,” the OECD said.
The central bank will hold its second policy meeting of the year later this month.
In another pointer to a hesitant recovery in Africa's biggest economy, new vehicle sales increased just 1.6 percent year-on-year in February compared to a 14 percent rise in January, and were seen remaining depressed this year. - Reuters