South Africa's currency struggles to hold it's own

May 26, 2015 2:40 PM

Rand weakness is a function of a much firmer dollar," said Nilan Morar of Global Trader, as the rand traded past the 12.00 to the dollar mark for the first time since May 13

The hand of former South African Reserve Bank Governor Gill Marcus is seen holding South Africa's new rand banknotes - which feature an image of former president Nelson Mandela on the front in a file photo.

South Africa's rand slipped to a two-week low on Tuesday, weighed down by poor domestic data while the dollar stretched recent gains.

At 1500 GMT the rand had weakened 1.09 percent to 12.0600 per dollar, with the next support around 12.15 in sight ahead of another wave of domestic data later this week.

"Rand weakness is a function of a much firmer dollar," said Nilan Morar of Global Trader, as the rand traded past the 12.00 to the dollar mark for the first time since May 13.

The dollar index, measuring the greenback against a basket of a major currencies, has firmed by over 4 percent in the last two weeks, buoyed by recent economic data bolstering bullish sentiment toward the world's no. 1 economy.

Durable goods data and solid business investment spending plans revived faith in the U.S.'s economic recovery and bets of rate hike by year-end, forcing the rand and its EM peers on to the backfoot.

First quarter indicators released by South Africa's statistics agency showed the economy expanded by only 1.3 percent in the first quarter while the jobless rate worsened.

"This is a very disappointing result for South Africa, and may imply that our growth forecast of 2 percent for 2015 as a whole will have to be revised downwards," said economist John Ashbourne of Capital Economics in a note.

Traders said they expected producer inflation, credit, money supply and trade data due in the week to keep the pressure on local assets.

Government bonds weakened, with the paper due in 2026 adding 6.5 basis points to 8.175 percent.