Raft of disappointing data sent the euro sliding during European trading hours on Thursday, while growing concerns over slowing Chinese economic growth slammed the Australian dollar and boosted the dollar and yen
JANICE ROBERTS
Published: 2012/03/22 06:46:47 PM
The rand remained over 1% softer against the dollar in late afternoon trade on Thursday as it tracked a euro that had weakened earlier against the greenback after eurozone data came in worse-than-expected.
"Things aren't looking good globally with the aggressive sell off in bonds," a local currency trader said.
"It was a surprise when China reported its soft manufacturing data earlier so people are taking risk off the table and there has been a large unwind in the rand, not only against the dollar, but against the crosses too - take euro rand for instance," he added.
The trader said equity markets were also "looking soft".
"All that, risk-off and euro negativity have caused further weakening in the rand.
"Our new base for dollar rand will be 7.66/7.67.
"In the short term we see the next dollar rand level at 7.76 and after that it will be 7.88, but for this to happen, the rand would have to stay above 7.76 and see some sustained trade."
At 15:48 local time, the rand was bid at R7.7228/$ from its previous close of R7.6438/$. It was bid at R10.1539/€ from R10.0994/€ before, and at R12.1918/£ from R12.1255/£ previously.
The euro was bid at US$1.3155 from its previous close of US$1.3217.
Markets were closed in SA on Wednesday for a public holiday.
Meanwhile Dow Jones Newswires reported that a raft of disappointing data sent the euro sliding during European trading hours on Thursday, while growing concerns over slowing Chinese economic growth slammed the Australian dollar and boosted the dollar and yen.
The negative tone was set in Asian hours after a key gauge of Chinese manufacturing activity showed a decline in March, unnerving traders and sending shares and riskier currency bets like the Australian dollar deep into the red.
Eurozone economic data and weak performance by peripheral eurozone bond markets further darkened the mood. German manufacturing activity unexpectedly contracted in March, while business activity in the eurozone as a whole shrank, cementing fears that the 17-country region is officially back in recession.
The weaker data sparked a selloff in the common currency, which sank to as low as 1.3133 against the dollar and to 108.79 against the yen. Yields on benchmark Spanish government bonds rose to their highest levels since January amid nagging concerns over possible fiscal backtracking by the country's authorities.
"The Chinese data opened the market's eyes to the possibility of slightly slower Chinese economic growth and the eurozone PMIs were a lot weaker than people were expecting," said Sara Yates, currency strategist at Barclays Capital.
The Australian dollar also continued to weaken, slipping below 1.04 against the greenback.
"What we're seeing is a topping out in positive data surprises from the beginning of the year. The most immediate impact will be on the Aussie dollar due to the confirmation of the weak Asian performance, because the biggest downside surprise really is on the Chinese side," said George Saravelos, senior currency strategist at Deutsche Bank in London.
Deutsche Bank now had a negative view on the Australian dollar against the yen, which was one of the day's few gainers.
Emerging European currencies also suffered, including the South African rand. The Turkish lira was a notable positive exception, firming against the dollar after the country's central bank announced it wasn't going to hold its one-week repo auction for the first time since early January.
Elsewhere, the pound fell sharply after disappointing UK retail sales data for February. Official figures showed UK retailers sold fewer goods than expected in February and January's sales were also weaker than previously reported. The pound fell to as low as 1.5770 against the dollar.
