* Rand weakens on added liquidity and European crisis
* Bonds follow currency, illiquid market exaggerates move
JOHANNESBURG Jan 4 (Reuters) – The rand fell 1.6
percent against the dollar on Wednesday as a liquidity injection
through a central bank auction and persisting concerns around
the crisis in Europe combined to snap its four-day rally.
Yields on government bonds shot up more than 10 basis points
as the weaker currency in an illiquid market drove prices lower.
The rand traded as weak as 8.1870 in the session,
levels last seen on December 29, compared with a 8.0570 close in
New York on Tuesday.
The currency slid through 8.10 support and is now looking to
test 8.22, the previous low.
The central bank held its weekly repo auction at midday,
with commercial banks taking up 19.7 billion rand ($2.41
billion) into the market, two billion more than at the previous
auction.
“The local market has been struggling for liquidity over the
last week … (The auction) seems to definitely have had an
effect on the market today. That increased liquidity has likely
edged the rand higher and also probably contributed to the
exaggerated movement in bonds,” said Rob Price a market analyst
at ETM.
Bond yields shot up on the benchmarks, adding 11 basis
points to 6.85 percent on the four-year bond and 13.5
basis points to 8.635 percent on the 2026 issue.
Continued…
