Current account deficit pushes rand down
THE rand and government bonds weakened yesterday after better-than-expected US jobs data boosted expectations that the US Federal Reserve will scale back its asset purchasing programme.
The rand fell most sharply against the dollar among a basket of 20 emerging market currencies, shedding 1.7 percent to a session trough of 10.1930 against the greenback, its weakest level in nearly two weeks.
The yield on the market benchmark 2026 bond climbed 20 basis points to close at 8.105 percent. The yield on the 2015 paper added 13 basis points to 6.15 percent.
“It was all about the non-farm payrolls, which were dollar-positive all round, and the rand took the brunt of that,” a trader said.
Fears that the US Fed will withdraw its bond-buying programme as its economy gains traction have put emerging market assets under pressure as investors perceive risks as outweighing their attractive returns.
The rand is additionally vulnerable because of a yawning current account deficit of nearly 6 percent of GDP, while labour strife in the mining sector has also dented sentiment.