The rand continued to weaken on Friday morning as global and local factors weighed on the local currency‚ taking it close to its lowest level against the US dollar in more than three years.
One of the reasons cited for the rand’s weakness was increased foreign exchange hedging activity surrounding the country’s renewable energy projects (REIPPs) and a risk-off global trading environment.
“Although we believe that the fundamental backdrop for SA (twin deficits and economic growth) remains precarious‚ we believe a lot of this ‘bad news’ is already priced into the rand at current levels‚ not to mention that REIPP hedging should now be complete‚” Absa Capital said.
At 8.33am‚ the rand was bid at R8.9291 to the US dollar from Thursday’s close of R8.9020. The local currency was bid at R11.3990 to the euro from its previous close of R11.3279 and at R14.1560 against sterling from R14.0958 before.
The euro was bid at $1.2766 from Thursday’s close of $1.2729.
“Yesterday’s data showed the euro area has failed to post growth for four consecutive quarters‚ worsening the global outlook. Price data showed that inflation in the US edged up to 2.2% y/y‚ after reaching a low point of 1.4% y/y in July‚” Absa Capital said.
“US retail sales also fell in October‚ adding to gloomy sentiment‚ even though this was partly on account of hurricane Sandy. Retail sales in the UK also slumped during October‚” the bank said. - I-Net Bridge