Rand drags on bonds

Comment on this story


IOL pic may23 economy arrows

.

Photo: Filomena Scalise

Johannesburg - South Africa's rand hit a fresh 2012 low against the dollar on Wednesday, erasing two days of gains as risk aversion fuelled by mounting fears Greece will leave the euro zone hit emerging markets.

The falls tracked declines in the euro as officials asked members of the single currency zone to prepare contingency plans in case of a Greek exit, sources told Reuters.

Yields on South African government bonds rose to one-week highs, with investors concerned that the weaker rand would increase inflationary pressures.

Earlier, data showed April headline inflation quickened to 6.1 percent year-on-year from 6.0 percent in March.

The rand traded at 8.44/dollar at 16h00 GMT, coming off the day's low of 8.4626, a level last hit in November.

“We've seen a lot of flight to safety. A lot more people are moving their money out of emerging market currencies into the US dollar so we're seeing a very strong dollar this afternoon,” said Paul Chakaduka, a dealer at Global Trader.

The rand is sensitive to developments in Europe as the region is a major trading partner. The currency is also very liquid and investors use it to hedge broader emerging market positions, making it highly susceptible to changes in global risk sentiment.

The yield on the heavily traded three-year government bond rose nine basis points to 6.415 percent while that for the 14-year paper climbed 9.5 basis points to 8.36 percent. - Reuters


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

     

Join us on

IOL-Social networks IOL-Social networks IOL-Social networks IOL-Social networks

Business Directory