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Rand, forint, lead emerging currency pullback
Imad Uddin
11 Jun, 2014
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Copyright Reuters, 2014
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![](https://i.brecorder.com/images/2014/06/randd.jpg">LONDON: South African local bond yields rose to the highest in six weeks on Wednesday on anticipation of rate hikes and a ratings downgrade, while the rand led a general emerging currency pullback versus the dollar.</P><P>Swaps markets indicate that investors are pricing roughly 100 basis points of policy tightening in South Africa over the coming year following a hawkish speech by central bank governor Gill Marcus. That has pushed up bond yields across the curve with two-year yields up 30 basis points this week</P><P>Foreigners sold $55.64 million worth of bonds on Tuesday, pressuring the rand which slipped 0.8 percent to the dollar to one week lows. Fears of a ratings cut this Friday are also pushing up debt insurance costs - 5-year credit default swaps rose 3 bps to 182, up almost 20 bps since last week.</P><P>Spreading labour unrest in the mining sector, weak growth, and high inflation make South Africa more vulnerable than other emerging markets to the rise U.S. yields and the dollar.</P><P>David Hauner, head of EEMEA fixed income and economics at Bank of America Merrill Lynch, said South African losses were being limited by the hunger for carry, given it offers some of the highest yields in emerging markets at over 8 percent.</P><P>)