South African rand, bonds tumble to 5-month low in panic sell

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JOHANNESBURG (Reuters) – South Africa’s rand sunk to its weakest level in more than five months on Thursday as sentiment toward the currency was soured by a combination of poor economic growth and investors fleeing emerging markets.

At 1400 GMT the rand was 2.04 percent weaker at 12.9750 per dollar, losing most of that ground as New York traders came online and offloaded their risk holdings as turbulence in other emerging markets and weak growth locally led to some feverish selling.

“We’ve seen some panic selling as the rand went past 12.85. A couple of stops were triggered and now its momentum trading. It’s nothing to do with South Africa’s fundamentals, it’s a global EM sentiment thing,” said fixed-income specialist at Rand Merchant Bank Michelle Wohlberg.

The yield on the benchmark 2026 bond was up 12 basis points to 8.795 percent, also its weakest since mid-December.

Traders noted that Brazil’s real was pounded in early trade, dragging other emerging currencies down with it. The real was down was down 1.2 percent to a new 2-year low.

“In this last move we’ve seen a lot of aggressive offshore buyers. We are not sure if there’s a large flow behind it. We’ve also seen the Brazilian currency weakening significantly, and other EM’s seem to be following suit,” said senior trader at Standard Bank Oliver Alwar.

A fall in U.S. weekly jobless claims also put pressure on the rand, which is still reeling from Tuesday surprise 2.2 percent contraction in first quart GDP.

April manufacturing data on the day was mixed, shrinking on monthly basis but up slightly annually.

“The rand’s still suffering from spillover effects from Tuesday’s GDP numbers. People are worried and aren’t convinced about the direction of the rand and the economy long-term,” said currency trader at TreasuryOne Wichard Cilliers.

The break of the 12.85 support line saw momentum indicators tilt to overbought levels, likely to spur a push to the psychologically crucial 13.00 mark.

Stocks were slightly firmer, with the Johannesburg Stock Exchange’s Top-40 index up 0.7 percent to 52,087 points, while the wider All-Share index was up 0.67 percent at 58,486 points.

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