* Rand tracks struggling euro
* Q1 current account data to show widening deficit
JOHANNESBURG, June 21 (Reuters) – South Africa’s rand
weakened against the dollar on Thursday, mirroring a dip in the
euro, after the U.S. Federal Reserve disappointed markets by
failing to introduce an aggressive bond-buying programme to
support a stalling economic recovery.
The rand weakened almost half a percent against the
greenback to 8.22 by 0613 GMT, from Wednesday’s New York close
of 8.1805. The rand often tracks the euro, the currency of its
largest trading partner.
Rather than announce “QE3” late on Wednesday, the Fed
expanded its “Operation Twist” by $267 billion, meaning it will
sell that amount of short-term securities to buy longer-term
ones to keep long-term borrowing costs down.
“The Fed’s decision to extend Operation Twist and to
implement nothing more has left EUR/USD struggling to break
1.2700 and USD/ZAR languishing at 8.20,” Rand Merchant Bank said
in a note.
South African bond yields dropped to all-time lows this week
after consumer inflation braked to 5.7 percent in May, back into
the central bank’s 3-6 target range and giving policymakers more
scope to cut already historically low rates if they see fit.
On Thursday, the yield on the three year bond rose
1.5 basis points to 5.985 percent and that on the 14-year paper
rose 2.5 basis points to 7.985 percent.
The South African Reserve Bank is due to release its Q1
current account figures on Thursday. Economists are forecasting
that the deficit will have swollen to 4.5 percent of GDP from
3.6 percent in the previous quarter.
(Reporting by Vuyani Ndaba; Editing by Ed Cropley)
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