JOHANNESBURG Nov 7 (Reuters) – South Africa’s rand turned
weaker against the dollar on Wednesday as an early boost to
emerging markets from Barack Obama’s re-election as U.S.
president waned and worries about the local economy persisted.
Government bonds were largely steady, with yields anchored
by market expectations that a re-weighting of the consumer price
basket could lead to higher inflation prints, denting the
chances of interest rate cuts.
The rand earlier touched a session high of 8.59 to
the greenback, its strongest level in three weeks, as Obama’s
victory pointed to continued quantitative easing in the United
States which should bolster high-yielding emerging currencies.
But the rand retreated to 8.65 by 1603 GMT, down 0.3 percent
from Tuesday’s close at 8.6270.
The currency was still dogged by negative international
publicity over wage strikes that have hit key mining output
since August, Tradition Analytics said in a note. Foreign
portfolio flows into the debt market had also dwindled after two
sovereign credit rating downgrades by Moody’s and SP.
“Due to a large current account deficit, waning inflows will
contain the recovery of the rand going forward,” it added.
South Africa has a yawning current account shortfall of 6.4
percent of gross domestic product, due to falling exports.
On the fixed income market, the yield on the benchmark
14-year bond closed flat at 7.645 percent while that
for the three-year issue rose half a basis point to 5.48
percent.
Market watchers said a revamped price basket announced this
week and effective early next year, coupled with above-inflation
wage settlements, would force an upward revision in inflation
expectations. That is likely to reduce the chances of a rate cut
and keep bond yields supported.
“Demand (for bonds) has also waned following WGBI and the
market is not really doing much at the moment,” a Johannesburg
trader said. South Africa was included in Citigroup’s World
Government Bond Index from October, which initially boosted
appetite for local debt.
Data from the JSE securities exchange shows foreign accounts
sold 2.1 billion rand ($242.73 million) worth of local bonds
last week.
($1 = 8.6518 South African rand)
(Reporting by Stella Mapenzauswa; Editing by Catherine Evans)
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