South Africa’s rand slipped to a new 13-year low against the dollar early on Tuesday, extending recent losses as investors continued to chase the US currency and sentiment towards domestic growth prospects remained downbeat.
By 06:26 GMT the local unit had conceded 0.71% to 12.1755 per dollar, having earlier tumbled to a new 13-year low and with the 13.8400 support level, last reached in March 2001, becoming a growing possibility.
The rand has lost more than 7% since February as the US dollar firmed on economic indicators affirming market bets of an upcoming rate hike.
“Investors are exceedingly concerned about how capital inflows to South Africa will hold up once US monetary policy normalisation starts,” analysts from NKC Independent Economists said in note to clients.
The rand failed to gain from Standard and Poor’s comments late on Monday that it was unlikely to downgrade South Africa’s BBB-credit status in the next 24 months.
Traders preferred to focus on underlying economic weaknesses, including chronic electricity shortages and labour unrest.
“These fears are exacerbated by South Africa’s gaping current account deficit,” NKC analysts added.
China’s producer price index declined 4.8 percent in February, the worst reading since Oct 2009, hitting emerging market currencies.
South African government bonds were weaker as yields in the U.S. continued to climb. The heavily-traded government paper due in 2026 added 2.5 basis points to 7.97% ahead of an auction at 09:00 GM