30 Jun

South Africa’s rand weaker as demand for emerging currencies wanes

JOHANNESBURG, June 30 (Reuters) – South Africa’s rand weakened further in early trade on Friday as a breach of key technical levels triggered short selling by offshore investors weary of local politics and betting the U.S. economy is on the mend and set for higher interest rates.

* By 0650 GMT the rand had weakened 0.23 percent to 13.0450 per dollar, compared to a close of 13.0150 overnight in New York.

* Better than expected estimates of economic growth in the United States in the previous session chipped away at the rand’s carry trade attraction, with higher yields in U.S. 10 bonds signalling an imminent move away from emerging currencies.

* Possible re-emergence of political noise as the ruling African National Congress begins its week-long policy conference also put the brakes on the rand.

* “Above the 13.00 we initially saw local exporter interest which kept it capped but once the local market called it a day New York pushed the rand as high as 13.0850 in what looked like a typical New York short squeeze,” said Nedbank Capital analyst Reezwana Sumad.

* South Africa publishes May trade data at 12000 GMT.

* Local bonds also suffered, with the yield on the benchmark government issue due in 2026 up 8 basis points to 8.785 percent, a 1-1/2 month high.

* Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.42 percent. (Reporting by Mfuneko Toyana, editing by Ed Osmond)

More: Reuters Africa

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