JOHANNESBURG: South Africa's rand started the week on the back foot on Monday, hitting a one-month low as investors pulled out of high risk assets due to heightened uncertainty about the Greek debt situation.
A weekend meeting of the G7 industrialised countries failed to come up with a plan to deal with the European debt crisis, adding to worries in global markets.
South African government bonds fell, with yields rising further from record lows seen last week.
Local stocks looked set to open weaker, in line with global markets. The JSE's Top-40 September futures contract was down 2.56 percent before the start of trade at 0700 GMT.
The rand was trading at 7.3275 to the dollar at 0646 GMT, 0.67 percent weaker than Friday's New York close of 7.2714, after hitting 7.3422, its weakest since Aug. 11.
"All this rand weakness has to do with dollar weakness," said Jim Bryson, dealer at Rand Merchant Bank, adding markets were extremely nervous after the G7 meeting failed to yield anything concrete.
"I expect the rand to remain under pressure, trading in the 7.28 to 7.38 range. But 7.38 is the danger level and the rand could weaken further from there."
A break of 7.38 would bring in 7.50, a one year low that was hit in early August after the US credit downgrade.
Charts suggest the rand remains in a weakening trend, trading weaker than its 50-, 100- and 200-day moving averages since September 2.
In fixed income markets, the yield on the 2015 bond rose eight basis points to 6.56 percent and that on the 2026 issue climbed by the same margin to 7.985 percent.
"A rebound of the 157 yield to 6.80 percent or as high as 7.10 in the coming week or two would be technically sound, and fundamentally healthy as it clears late longs and weak hands from the trade. The trade had become too one-sided in recent weeks," ETM said in a note.
Reserve Bank Deputy Governor Daniel Mminele will give a speech at 1000 GMT. Consumer confidence figures released at the same time should show how the high street is holding up against the gloomy economic backdrop.
Comments
Comments are closed.