* Rand falls vs dollar in global risk sell-off
* Yields rise but foreigners still buying local bonds
JOHANNESBURG, July 23 (Reuters) – The rand fell over two
percent against the dollar on Monday, hit by euro debt troubles
and a bleak domestic outlook that saw the unit lose the most in
a basket of its emerging market peers.
Bond yields rose in the session following a sharp rally
driven by a domestic rate cut last week. The central bank
surprising cut interest rates to 5 percent on Thursday, a move
that is adding pressure to the currency as it points to
increased concerns about economic growth.
The rand dropped 2.3 percent to 8.4810/dollar in
afternoon trade on Thursday, its biggest daily fall since June
21 when it lost over 2.4 percent and off a close of 8.29 in New
York on Friday.
“We have big ‘risk off’ with equity markets plunging and its
not surprising to see such a big move. That the central bank cut
interest rates despite the fact that the rand was already weak
signals that their priority is growth,” said Murat Toprak,
emerging market strategist at HSBC.
Earlier in the session the bank again reiterated its
concerns about the impact that Europe was having on local
exports while Finance Minister Pravin Gordhan said economic
growth would likely miss the 2.7 percent government
target.
Gordhan welcomed the interest rate cut, saying it showed the
bank was also focused on employment creation and economic
growth.
Bond yields rose as Spanish borrowing costs soared and
fuelled risk aversion globally. The yield on the 2021 issue
climbed 12 basis points to 6.625 percent and 2026 bond
rose 16 basis points to 7.355 percent.
“We’ve had an incredibly hard rally. We’ve seen a massive
amount of investment come in and you’re probably getting
-particularly your leverage, short-term investors- starting to
take a profit and the weaker currency is a catalyst for that at
the moment,” said Vivienne Taberer, fixed income portfolio
manager at Investec.
Offshore accounts bought 6.2 billion rand worth of
government bonds last week and dealers see the broader trend
continuing in the coming months as investors seek out higher
returns from emerging markets.
(Reporting by Xola Potelwa; editing by Ron Askew)
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