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South African rand softer against globally strong dollar

شعار Reuters Reuters 28/05/2014
South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg January 17, 2013. © Siphiwe Sibeko/Reuters South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg January 17, 2013.

JOHANNESBURG - The South African rand weakened against the dollar on Wednesday, reaching its softest level in nearly three weeks, as commodity prices fell and the greenback was generally stronger against a basket of major currencies.

The rand fell to a session low of 10.5220 to the dollar, a level last seen on May 7, before recovering to 10.4830 by 1550 GMT, still down 0.22 percent from Tuesday's close in New York.

The move was largely a factor of dollar strength against currencies like pound sterling and the euro, while the market was also still reeling from Tuesday's weaker-than-expected first quarter GDP data for South Africa.

"The bad numbers are still lingering ... and the dollar is quite strong on global markets; we've seen the pound getting hammered, the euro getting hammered," said Ion de Vleeschauwer, chief dealer at Bidvest Bank.

"This doesn't go well for the rand unfortunately, so we'll probably see some weakness for the rest of the week."

South Africa's economy contracted in the first quarter of the year as a platinum strike hit mining output. Another contraction in the second quarter would plunge the country into another recession, after the last one in 2009.

Government bonds weakened alongside the rand on Wednesday, pushing the yield on the heavily-traded 2026 bond up 6.5 basis points to 8.255 percent. The shorter-dated R157 issue added 3 basis points to 6.635 percent.

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