Rand extends losses, nears R8

Johannesburg - The rand hit a fresh three-week low against the dollar on Wednesday, trading close to a resistance level of R7.95 that looks vulnerable given political uncertainty in Europe and signs of shaky domestic economic growth.

Weak unemployment and business confidence figures have cast doubt on the sustainability of the recovery of South Africa’s economy.

The finance ministry told parliament on Tuesday that slower growth in South Africa's main trading partners and rising oil prices were posing a risk to growth.

Analysts will focus on manufacturing numbers on Thursday for further clues.

The rand hit a three-week low of R7.945 in early trade, from a R7.8940 close in New York on Tuesday. It recovered slightly to R7.9133 by 06:35 GMT, down 0.24%.

"We're trading very poorly after the euro came off and the unemployment data yesterday. We've broken quite an important resistance level at R7.88/89 so I think you’ll see importer buying interest towards those levels again," said Jan Defouw, a trader at Standard Bank in Johannesburg.

Dealers said stop losses were triggered at R7.88 and that drove the rand above the R7.90s but it may come back to R7.88 before it tries for R7.95 and then the R8 level again.

Yields on government bonds recovered from Tuesday’s weakness and were up two basis points early in the session.

The three-year bond was at 6.51% and the 2026 issue at 8.26%.

Analysts say the bond market continues to be cushioned by real money accounts buying local debt on the bonds’ likely inclusion into an influential Citi world bond index. Foreigners have taken up about R19bn in debt since the announcement.

The government will announce issuance plans for next week at 09:00 GMT

Source: www.fin24.com

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