S.Africa's rand extends losses against dollar, bonds weaker

by Reuters 0

S.Africa's rand extends losses against the dollar after U.S. Federal Reserve Chair said the bank was on course to raise interests.

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.

(READ MORE: S.Africa’s rand flat vs dollar ahead of rates decision)

“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.