JOHANNESBURG- South Africa’s rand slid against the dollar on Friday as weaker-than-expected Chinese gross domestic product data hit emerging market sentiment, while bonds were flat after a holiday-shortened week.
From being the strongest performer against the dollar among 20 emerging market currencies on Thursday, the rand was third from bottom on Friday as investors spooked by renewed global growth worries fled to safe-haven assets.
The rand fell more than 1 percent to a trough of 7.9510/dollar before coming back slightly to 7.94 by 1602 GMT, down 0.95 percent on the day.
“When that Chinese GDP data came out and it was softer than markets expected we saw quite a fair bounce higher on dollar/rand. Pretty much through the day it’s been the rand’s reaction to how the offshore market has factored that data,” said Sean McCalgan, a market analyst at ETM.
Thirty percent of South African exports are to Asia, making the rand especially vulnerable to signs of weakening in the Chinese economy.
“Most of the local banks and traders are still holding a weaker rand outlook,” McCalgan added.
Global economic uncertainty is set to keep the rand trading in a narrow range over the next 12 months, although the prospect of rising interest rates could lend some support to the currency, a monthly Reuters poll showed last week.
Demand for local debt remained lukewarm on Friday, capping a thin trading week which only started on Tuesday as local traders were away on Monday for Easter.
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The yield on the three-year benchmark inched up just two basis points to 6.72 percent while that for the 15-year issue was down 1.5 basis points at 8.44 percent.
“There’s hardly anyone really playing in the market at the moment. If you look at the size of the bids that (went) into the weekly auction it just shows that there’s no real depth to the market,” said Ashley Dickinson, a bond trader at Renaissance Capital.
“I think we’ve had a reasonable run from the weaker levels so I’m guessing that there has been some profit-taking in the last two days.”
Foreign accounts that tend to dominate the bond market sold a net 1.6 billion rand worth of South African bonds of shares last week, according to the JSE exchange.-Reuters
