S.Africa's rand steadies, could extend losses vs dollar
JOHANNESBURG: South Africa's rand steadied against the dollar on Friday after touching 7-week lows the previous day but could target 7.15 as foreigners dump local bonds and stocks after the central bank signalled an end to its monetary loosening cycle.
The Reserve Bank's decision to leave its repo rate unchanged at 5.5 percent was largely expected after reducing rates by 650 basis points since late 2008, but it probably disappointed foreign investors who had still bet on the off-chance of one more rate cut.
"Another cut would have been positive for the bond market and the equity market but with that not materialising I think we've seen a bit of scaling down on South African assets by foreigners," said Bidvest Bank chief dealer Ion de Vleeschauwer.
"Those amounts that have been flowing in have been large and if they start leaving, the rand is going to feel a bit of pressure. That's why the rand is looking a bit bleak and I expect that to be with us in the short term."
At 0713 GMT the rand traded at 7.0620 against the greenback, up 0.3 percent from Thursday's closing of 7.0840.
The currency has gained about 26 percent against the dollar in the last 24 months, largely buoyed by portfolio flows, but shed more than 1.4 percent to 7.113 on Thursday, its weakesst level since Nov. 30.
Charts show the rand has crossed its 50-day moving average, suggesting it is on a short to medium term weakening trend, but it is still above its long term moving average and should find support at the 7.15 area.
Government bonds extended losses which have driven them to 6-1/2 month lows and the the yield on the benchmark 2015 bond climbed to 7.77 percent from Thursd! ay's clo se at 7.63 percent.
Stocks opened slightly positive on Friday after a second straight day of losses the previous day. The Top-40 blue-chip index <.JTOPI> was up 0.36 percent to 28,619.50 points soon after the bourse opened at 0700 GMT.
The Reserve Bank's decision to leave its repo rate unchanged at 5.5 percent was largely expected after reducing rates by 650 basis points since late 2008, but it probably disappointed foreign investors who had still bet on the off-chance of one more rate cut.
"Another cut would have been positive for the bond market and the equity market but with that not materialising I think we've seen a bit of scaling down on South African assets by foreigners," said Bidvest Bank chief dealer Ion de Vleeschauwer.
"Those amounts that have been flowing in have been large and if they start leaving, the rand is going to feel a bit of pressure. That's why the rand is looking a bit bleak and I expect that to be with us in the short term."
At 0713 GMT the rand traded at 7.0620 against the greenback, up 0.3 percent from Thursday's closing of 7.0840.
The currency has gained about 26 percent against the dollar in the last 24 months, largely buoyed by portfolio flows, but shed more than 1.4 percent to 7.113 on Thursday, its weakesst level since Nov. 30.
Charts show the rand has crossed its 50-day moving average, suggesting it is on a short to medium term weakening trend, but it is still above its long term moving average and should find support at the 7.15 area.
Government bonds extended losses which have driven them to 6-1/2 month lows and the the yield on the benchmark 2015 bond climbed to 7.77 percent from Thursd! ay's clo se at 7.63 percent.
Stocks opened slightly positive on Friday after a second straight day of losses the previous day. The Top-40 blue-chip index <.JTOPI> was up 0.36 percent to 28,619.50 points soon after the bourse opened at 0700 GMT.
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