HomeNewsRand under pressure on North Korea risk

Rand under pressure on North Korea risk

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JOHANNESBURG — The rand weakened against the dollar yesterday and will likely remain under pressure as news of North Korean leader Kim Jong-il’s death sent investors to safe-haven assets such as the United Stated currency.

The rand was poised to end the year down more than 20% against the dollar, battered by risk aversion as the eurozone debt crisis deepened.

Ratings agency Fitch warned on Friday it might downgrade France and six other eurozone countries as it believed a comprehensive solution to the region’s debt crisis was “technically and politically beyond reach”, making investors even more cautious.

The rand was trading at R8,3850/$, not far from Friday’s New York close of R8,3750/$.

“Given dollar/rand’s sensitivity to the euro we wouldn’t rule out wide swings, especially with thinning liquidity. Fresh risk aversion could see it test this year highs at R8,60 once again,” market analysts 4CAST said in a note.

The rand hit 2½ year lows at R8,61/$ in November and has remained vulnerable, failing to break firmer than the psychologically key level of R8,00/$ despite several attempts.

With some dealers off for holidays, trading volumes will be thinner, rendering the currency vulnerable to wide moves.

Stocks looked set to open weaker, with the Johannesburg Stock Exchange’s Top-40 March futures contract down more than 1% before the start of trade.

Government bonds were largely steady, with the 2015 bond up one basis point to 6,95% and that on the 2026 issue unchanged from the previous close at 8,705%.

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