The rand may extend its loss of more than 4 percent against the dollar since the start of April after South Africa’s currency breached a key resistance level, according to Standard Bank Group Ltd.
The rand may decrease 1.9 percent from the last close to 7.70 per dollar “in the near term” after ending weaker than 7.50 for the first time in two months yesterday, Michael Keenan, a Johannesburg-based strategist at Standard Bank, wrote in a research note. The rand lost as much as 0.9 percent to 7.6176 per dollar today, the weakest intraday level since March 2.
With the rand “breaching the 7.50 per-dollar resistance level” yesterday “it might be entering a new trading range,” Keenan wrote. The currency’s decline “could extend to 7.70 rand per dollar in the near term,” Keenan wrote. The rand traded 0.3 percent weaker at 7.5770 as of 10:55 a.m. local time, from a previous close of 7.5526.
Investors dumped emerging-market assets this week on concern a government debt crisis in the European Union may spread, threatening to derail the global economic recovery. A report yesterday showed South Africa’s unemployment rate, the highest of 62 countries tracked by Bloomberg, rose for a fourth consecutive quarter. The increasing “risk aversion” may make the rand less attractive versus the Turkish lira because the South African currency has a high beta, or risk profile, Credit Agricole CIB wrote in a note to clients today.
Government bonds fell in South Africa for a third day, raising the yield on the benchmark 13.5 percent security due September 2015 by 7 basis points to 7.99 percent. The bond’s price dropped 34 cents to 123.58 rand.