• Tuesday, May 28, 2024
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South Africa’s rand falls to 8-month low as dollar surges


South Africa’s currency tested fresh eight month lows against the dollar on Friday as the already rampant U.S. currency received a further boost from upbeat GDP numbers.

The rand, under heavy selling pressure this week, extended earlier losses after the United States said its economy grew at its fastest pace in over two years.

The currency hit 11.2605/dollar, its weakest since early February.

South Africa has been caught in an emerging market sell-off as the dollar flourishes on signs that the Federal Reserve has reason to hike interest rates. The dollar index was at a four-year peak on Friday.

Local dealers said with global cash flowing back to the United States, emerging markets were in for some more heavy selling. Countries who suffer imbalances such as South Africa’s current account gap are likely to be the hardest hit.

“Given South Africa’s large current account deficit, and the scope for bouts of global market turmoil to prompt further declines, we have revised down our end-2014 forecast to 11.25/dollar,” Jack Allen at Capital Economics said, adding 25 cents to the previous forecast.

The rand has now suffered four consecutive weeks of losses. It is down 7 percent so far this year and is at risk of further weakness next week with the release of trade data on Tuesday that could add to its woes.

However after such sharp recent falls, the unit is likely to take a breather before further weakness. Dealers said initial support will be at the 11.27/28 area, its Feb. 4 level.

Yields on government bonds rose 8 basis points to 8.245 percent on the benchmark 2026 issue.