JOHANNESBURG – South Africa’s rand pared losses on Monday after dropping sharply in erratic Asian trade with dealers talking of Japanese sellers in a very illiquid market.
By 0813 GMT the rand was 2.85 percent weaker at 16.78 against the U.S. dollar, stabilising after falling as much as 10.3 percent at one stage in Asian trade to reach 17.9950 per dollar, by far its weakest level ever.
“It appears as if yield-hungry Japanese retail investors decided to cut their ZAR positions this morning, which triggered a number of stop losses and sent the currency into freefall,” Barclays Africa currency strategist Mike Keenan said in a note.
South Africa’s currency has hit several record lows already this year on concerns about slowing growth in Africa’s most developed economy and in-line with weakness in other emerging markets.
President Jacob Zuma said on Sunday that markets overreacted to his decision to change finance ministers twice in a week last month, comments likely to worry investors.
“Local sentiment remains poor and the fact that this weekend’s ANC conference did not address investor concerns, suggests that these fears could persist,” Keenan said.
“The underlying ZAR mood remains extremely bearish.”
“The devaluation of the yuan in China promoted uncertainty for investors in emerging markets including South Africa,” said Johannesburg-based economist Ian Cruickshanks.
“There are domestic factors as well, basically all the factors impacting the production in mines and industry, erratic supply of electricity, uncertainty in the labour workforce who have high wage increase demands,” he added.
Slowing growth in China, the top destination for South Africa’s raw materials, was expected to further hurt the the country’s struggling economy.
Facebook Comments