Rand gets whacked by precious metals and falling prices
April 30, 2004
Johannesburg - The rand pulled off two and a half month lows yesterday after the dollar retreated against key currencies on weaker US growth numbers, but sentiment was still bearish, analysts said.
The rand dipped to R7.0150 per dollar - its weakest level since February 9 - whacked by a precious metals rout and news that the country's producer prices fell at a faster pace in the year to March.
Yesterday gold fell to a new five and a half month low under $380.00 an ounce in Europe, still reeling from the previous day's sharp knock amid fears that moves by China to cool its economy would have serious repercussions for metals demand.
At 5pm the rand was trading at R6.8780 a dollar compared with R6.92 at close overnight.
"This morning there were enough exporters to prevent a clear break of R7 a dollar. I think that's what has helped it off the highs [weaker levels]," said Caroline Gorman, an analyst at 4Cast in London.
"I think now it's just generally taking the lead from global markets, which have been very choppy after the US gross domestic product figure. The euro moved stronger after that and that's why the rand has not had a test of another upside," she said.
The euro surged higher against the dollar, after data showing first quarter US gross domestic product growth up 4.2 percent, undercutting economists' forecasts for a rise of 5 percent.
Upbeat economic data have fuelled expectations that interest rates in the US would rise sooner rather than later, putting pressure on high-yielding currencies such as the rand.
Analysts said while they did not expect speculators to have another go at R7 a dollar in overnight trade, market sentiment towards the rand and other emerging currencies had turned negative. "Given the global backdrop, the bias is towards a weaker rand," Gorman said.
Bonds were unmoved by the producer price index data, overshadowed by a weak rand and global apathy towards debt.
The yield on the R194 was 0.065 percent weaker at 9.770 percent while the yield on the benchmark R153 lost 0.03 percent at 9.795 percent.
"It's all about the rand at the moment," said Michael Keenan, an analyst at ETM.
"We expect the R153 bond to peak at 10.20 percent before we see value in bonds again."
|
|
