By Jose Alface | November 15, 2011 8:00 PM SAST
S.African Rand Hits a 2-Week Low
S.African Rand Hits a 2-Week Low
South Africa's government bonds fell sharply on Tuesday and yields surged to six week highs as the market took comments from Governor Gill Marcus that the central bank would maintain its focus on inflation as a sign it might not cut rates further.
The rand weakened to two week lows against the dollar, still weighed by risk aversion as a solution to euro zone debt worries remains illusive, casting a shadow on the global economic outlook.
The yield on the 2015 government bond jumped as much as 27 basis points to 6.94 percent, its highest level since October 4 and was last at 6.83 percent, up 16 basis points on the day.
The yield for the 2026 bond yield soared to 8.645 percent from Monday's close at 8.44 percent.
"The bond market sold off aggressively post the Reserve Bank's comments earlier regarding inflation targeting," Absa Capital trader Duncan Howes said.
The central bank will keep its focus on achieving a 3-6 percent inflation target over the medium term, while remaining sensitive to the domestic economic situation, Marcus told a meeting of the Swiss Chamber of Southern Africa.
The market had been pricing in the small chance of a rate cut boost the struggling economy, but the Reserve Bank kept its repo rate unchanged at 5.5 percent last week, citing inflation pressures slightly emanating from a weaker rand.
The rand has been buffeted by risk aversion alongside other emerging market currencies as investors fret about global contagion from the euro zone debt woes.
The currency plunged to 8.2038 against the dollar on Tuesday, its weakest level since November 1, and was trading at 8.1949 by 1630, down 2.3 percent from Monday's close.
"It's nothing domestic, euro/dollar's turning lower again and the rand has moved in step with this today," said Christopher Shiells, emerging market analyst at IGM.
The rand exchange rate was now seen imparting an upside risk to the inflation outlook, Marcus said. She added in a separate radio interview there was not much that the Bank could do to control its volatility.
To contact the editor, e-mail:
EMAIL
PRINT
SHARE
- South African Banknotes Will Bear Nelson Mandela’s Likeness
- South African bank notes to bear Mandela's image
- IMF's Lagarde: euro likely to survive 2012
- S.Africa rand steadies, yields down as bonds edge up
- S.Africa monetary policy to focus on inflation: Marcus
- S.Africa's rand firms, bonds weak on rates outlook
- S.Africa C.bank to manage Anglo/De Beers inflows
- SAfrica cbank holds rates, targets inflation
- SAfrica's rand falls 2.8 pct on outlook downgrade, EZ crisis
