Rand pares losses after dive in Asian trade

folarin okunola

January 11, 2016 11:06 AM

By 0813 GMT the rand was 2.85 percent weaker at 16.78 against the U.S. dollar, stabilising after falling as much as 10.3 percent at one stage in Asian trade to reach 17.9950 per dollar, by far its weakest level ever.

A South African child holds a 50 rand note July 2. The rand sank to a fresh low against the dollar in early afternoon trade on Thursday as bond yields vaulted to their highest levels in 18 months.

South Africa's rand pared losses on Monday after dropping sharply in erratic Asian trade with dealers talking of Japanese sellers in a very illiquid market.

"It appears as if yield-hungry Japanese retail investors decided to cut their ZAR positions this morning, which triggered a number of stop losses and sent the currency into freefall,"Barclays Africa currency strategist Mike Keenan said in a note.

South Africa's currency has hit several record lows already this year on concerns about slowing growth in Africa's most developed economy and in-line with weakness in other emerging markets.

President Jacob Zuma said on Sunday that markets overreacted to his decision to change finance ministers twice in a week last month, comments likely to worry investors.

"Local sentiment remains poor and the fact that this weekend’s ANC conference did not address investor concerns, suggests that these fears could persist," Keenan said.

"The underlying ZAR mood remains extremely bearish."

The JSE securities exchange's Top-40 futures index was down 1.04 percent, suggesting the local bourse would open more than 450 points lower.

In fixed income, government bonds mirrored the rand, with the yield for the benchmark 2026 government bond adding 34 basis points to 9.865 percent.

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