Rand weakens on negative sentiment

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IOL world currency1 Graphic: Renjith Krishnan.

Johannesburg – The rand was weaker in early morning trade on Tuesday as negative sentiment from the continued strife in the mining sector offset an improving global economic environment.

“For the moment the market is sentiment driven and we see that reflected in the net foreign selling of bonds. The next test is the R9.20 level as the R9.10 did not provide much support‚” a local trader said.

At 8.14am‚ the rand was bid at R9.0987 to the US dollar after touching R9.1258 in early trade from R9.0897 at Monday’;s close and R8.9422 at Friday’s close. The local currency was bid at R12.2342 to the euro from its previous close of R12.2265 and at R14.2867 against sterling from R14.2652 before. The euro was bid at $1.3448 from Monday’s close of $1.3447 and Friday’s close of $1.3465.

Absa Capital analysts said in their morning report that a close eye must be kept on portfolio flows‚ because these inflows are critical to the funding of SA’s large current account deficit.

“On Monday we saw a substantial outflow from the SA bond market as the yield curve bear steepened in response to the softer US dollar environment. While these portfolio flows are the transmission mechanism through which the investors express a rand stance‚ continued outflows could necessitate extended rand weakness to help compensate for the current account imbalance‚” the bank said. - I-Net Bridge

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