South Africa’s rand extended losses against the dollar early on Monday after a statement by U.S. Federal Reserve Chair Janet Yellen on Friday signalled the bank was on course to raise interest rates later this year, stoking greenback buying.
(READ NORE: S.Africa’s rand touches new 8-mth low vs dollar)
By 0645 GMT the rand had softened 0.28 per cent to a week-low of 12.0690 per dollar, remaining above the crucial technical level that is likely to see the unit weaken further towards 2002 lows of 12.6500.
The rand flirted with three-week highs in the previous week before capitulating to a firming dollar, as inflation pressures increased with local petrol prices set to rise 14 percent on Wednesday.
A wage dispute between South African public sector unions demanding a 10 percent wage hike, against an offer of 5.8 percent, is also likely to pressure the unit.
“The fact that government hasn’t made any tangible progress on this matter remains a concerning overarching factor for the rand,” said economists at ETM Analytics in market note.
Government bonds were also weaker, with the benchmark issue due in 2026 adding 5 basis points to a week-high of 7.88 per cent.