Rand weakens as rising US bond yields buoy dollar

THE RAND weakened more than 2 percent against the dollar yesterday, hurt by a greenback which drew strength from rising US bond yields, while stocks ended lower. At 5pm, the rand bid at R12.589 to the dollar, 30.41 cents softer than on Monday. Many emerging market currencies took a hit as US Treasury yields again traded above the psychological three percent level, supporting the dollar. – Reuters

THE RAND weakened more than 2 percent against the dollar yesterday, hurt by a greenback which drew strength from rising US bond yields, while stocks ended lower.

At 5pm, the rand bid at R12.589 to the dollar, 30.41 cents softer than at the same time on Monday.

Many emerging market currencies took a hit as US Treasury yields again traded above the psychological 3 percent level, supporting the dollar which strengthened for a second consecutive session.

“We have definitely seen a sharp reversal on the dollar which has gained against a broad basket of currencies from both emerging and developed economies,” IG South Africa senior market analyst, Shaun Murison said.

“The rand, after clawing back some strength over the past few days is renewing weakness against the greenback with the short term high at R12.75/$ the next obvious upside target, a break of which suggests R13/$ the next round number target.”

The local unit has been led by external factors in recent weeks, but yesterday’s weakness also came as data showed the unemployment remained at a stubbornly high rate of 26.7 percent in the first quarter.

Government bonds also weakened, with the yield on the benchmark instrument due in 2026 jumping 15 basis points to 8.49 percent.

Stocks ended the day lower, with the all share index down 1.23 percent at 57 891.77 points and the blue chip Top40 index falling 1.28 percent at 51 333.23 points.

Meanwhile, the dollar and Treasury yields jumped on Tuesday following US data showing a rise in monthly retail sales, weighing on stocks that also were undercut by renewed worries over global trade frictions.

The yield on the benchmark US 10-year Treasury note touched its highest since July 2011, while the dollar hit its highest point of the year against a basket of currencies. Wall Street’s main stock indices slumped, with investors concerned that rising bond yields would hurt stock valuations.

US retail sales rose moderately last month as rising oil prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter.

The US Commerce Department said retail sales increased 0.3 percent last month.