* Rand tracks weaker euro, foreigners push bonds higher
* Market sees another rate cut this year
JOHANNESBURG, July 20 (Reuters) – South Africa’s rand
weakened more than 1.1 percent against the dollar on Friday but
was cushioned from further losses by strong foreign demand for
local bonds which are still offering significant yields despite
a surprise interest rate cut.
The rand hit a session low of 8.2797 to the
greenback, its softest since Monday, but came back slightly to
8.2650 by 1800 GMT, down 1.1 percent on the day.
The rand tracked the euro, under renewed pressure following
a spike in Spanish bond yields. The debt crisis in the bloc, a
key trading partner for South Africa, continues to weigh on risk
sentiment.
“Since Europe came in we’ve just seen one-way traffic with
the euro getting hammered again on concerns over Spain and
global growth,” said Bidvest Bank chief dealer Ion de
Vleeschauwer.
South Africa’s official rate cut on Thursday “caught some
people by surprise and that’s also going to put a bit of
pressure on the local currency,” he added.
The Reserve Bank cut its benchmark repo rate by 50 basis
points to 5.0 percent, citing a weaker economic outlook while
inflation was seen benign.
On Friday, government bond yields hovered close to the
previous day’s record lows as some market players bet that
another rate cut could be on the horizon later this year.
Continued…
