The rand weakened against the dollar as the market reeled after Standard & Poor's warned it may carry out a mass downgrade of euro zone countries.
|||Johannesburg - South Africa's rand weakened against the dollar on Tuesday as the market reeled after ratings agency Standard & Poor's warned it may carry out an unprecedented mass downgrade of euro zone countries.
The agency said it could downgrade the ratings of 15 countries if leader do not move decisively to solve the region's debt woes. The European Union will meet on Friday and markets are hopeful of an outcome that will be one step toward a solution.
The rand weakened against the dollar, retreating from three-week highs of 7.9640 seen in the previous session. It was trading at 8.08 against the dollar at 0651 GMT, 0.2 percent weaker than Monday's New York close of 8.0624.
“S&P's decision ... has interrupted the bullish rand trend. Dollar/rand opened at 8.05 with a risk of 8.10/12 as the ratings news gets absorbed in the market,” said RMB in a note.
“Sentiment should, however, recover: Yesterday's agreement between Germany's Chancellor Angela Merkel and France's President Nicolas Sarkozy is keeping hopes alive of a region-wide deal on Friday.”
The rand has recovered from a 2-1/2 year low of 8.61 hit in November but has not quite shaken off the weaker trend.
Tradition Analytics said a rebound to 8.21 and 8.36 could be on the cards in the short term.
Stocks looked set for a negative start. The JSE's Top-40 December futures contract was down 0.42 percent before the start of trade at 0700 GMT.
Government bonds weakened ahead of a weekly debt auction whose results will be out at 0900 GMT.
The yield on the 2015 bond was up five basis points to 6.715 percent and that on the 2026 issue climbed by the same margin to 8.41 percent. - Reuters
Source: http://www.iol.co.za/euro-zone-crisis-weakens-rand-1.1193028
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