JOHANNESBURG Oct 3 (Reuters) – South Africa’s rand weakened
to a one-month low on Wednesday as commodity currencies came
under pressure and the positive effects of inclusion in an
influential bond index began to wear off.
The rand was trading at 8.4226 to the dollar at 1550 GMT,
0.7 percent weaker than Tuesday’s New York close, after falling
to a session low of 8.4590.
Other commodity-linked currencies, such as the Canadian and
Australian dollars, fell on Wednesday on weak economic data from
China and Australia.
Traders said the rand was also returning to its normal
levels after it received a boost from South Africa’s inclusion
in the Citi World Government Bond Index on Monday.
“There was a demand for rand which didn’t reflect where the
rand should be based on our economic fundamentals,” said Jim
Bryson, a currency trader at Rand Merchant Bank. “We were down
too low because of the index and this is probably more where we
should be.”
Government bond yields edged lower, with the yield on the
2015 bond 6 basis points lower at 5.32 percent and
that on the 2026 paper down 3 basis points at 7.49
percent.
Further foreign inflows related to the WGBI inclusion should
provide additional support to yields, analysts at Absa Capital
wrote in a note published on Tuesday.
“We remain constructive on domestic rates, on the back of
our view that passive investors will increase their holdings of
domestic securities over the coming months, and that the global
economic outlook will remain depressed and monetary policy
biased looser for some time to come,” the note said.
(Reporting by Tosin Sulaiman; Editing by Ruth Pitchford)
© Thomson Reuters 2012 All rights reserved
