JOHANNESBURG: South Africa's rand weakened to a two-and-a-half week low against the dollar early on Monday as investor bets on quantitative easing in the eurozone and weak global growth prospects strained sentiment toward emerging market assets.
By 0625, the local unit had slipped 0.25 percent to 11.7400 per dollar, its weakest level since Dec 17 amid growing expectations the European Central Bank would print money.
The eurozone is battling weak economic activity and consumer spending that has remained outside the ECB's 2 percent target, with the December CPI number due later in the week expected to show little improvement from the current 0.3 percent.
The rand is in danger of slipping back toward six-year lows of 11.8400 under the current risk-shy climate, which has favoured dollar buying, as yawning budget and trade deficits as well as an unreliable electricity supply worries investors.
While the rand is not the only currency under pressure from dollar strength, South Africa's fragile economic fundamentals pose significant risk to any kind of recovery when the dollar bull-run eventually corrects, a currency trader said.
"The investment money is going to flow into those risky assets that are less susceptible to external shocks and have their ducks in somewhat of a row," Warrick Butler, executive trader at Standard Bank wrote in a market note.
"This is where my fear factor starts kicking in because South Africa is not in that position."
Local bonds were also weaker, with the government issue due in 2026 adding 4 basis points to 8.03 percent.
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