Analyst noted that the stronger dollar was providing most of the direction and that the fall in commodity prices had been as a result of the robust greenback
Johannesburg, Mar 20 (I-Net Bridge) — The rand was over 1.41% softer against the dollar in late afternoon trade on Tuesday as the greenback firmed across the board on concerns surrounding China’s growth.
"This view on China seems to have come into fashion only very recently, but we’ve seen it coming for a while," a local analyst said.
"Monetary dynamics in China points towards the likelihood of a gross crash unless they ease up in a much more substantial way and it doesn’t look like they’re doing that," he added.
The analyst noted that the stronger dollar was providing most of the direction and that the fall in commodity prices had been as a result of the robust greenback.
At 15:42 local time, the rand was bid at R7.6330/$ from its previous close of R7.5295/$. It was bid at R10.0611/€ from R9.9610/€ before, and at R12.0877/£ from R11.9599/£ previously.
The euro was bid at $1.3190 from its previous close of $1.3229.
Meanwhile Dow Jones Newswires reported that the dollar reigned across currency markets after concerns about a slowdown in Chinese growth triggered caution in markets and put commodity currencies under pressure, with the Australian dollar suffering the heaviest losses.
Investor sentiment soured in Asian hours after an executive from Australian mining giant BHP Billiton noted that iron ore demand from China was showing signs of slowing. The comments sparked a sharp selloff in the Australian dollar, which was often seen as a proxy for trading Chinese growth prospects, but other commodity currencies such as the New Zealand dollar and the Canadian dollar also came under pressure.
The greenback managed to extend gains across the board as European trading got underway, while equities and particularly mining stocks suffered and safe-haven German bunds ticked higher. The currency’s gains were also aided by US 10-year Treasury yields surging to the year’s high of 2.39% late Monday, after the President of the New York Federal Reserve sounded cautiously optimistic about the country’s growth outlook.
"If the US can continue to demonstrate upside growth surprises without upsetting the policy balance too much, the dollar’s safety status should remain assured," said UBS in a note to clients.
