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South Africa's rand weakens as traders bet on sharper falls

Reuters logo Reuters 2017-08-02
New South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg © REUTERS/Siphiwe Sibeko New South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg

South Africa's rand inched weaker on Wednesday as traders anticipated further weakness as the unit broke through successive technical levels in an economy in recession with possible ratings downgrades on the horizon.

At 0813 GMT the rand traded 0.13 percent weaker at 13.2975 per dollar compared with its close of 13.2800 overnight in New York.

The rand tumbled to 13.3100 in the previous session, its weakest in three weeks, following a warning by the central bank governor that the economy remained under severe strain.

On Monday, Moody's, the last of the top three ratings firms to rank South Africa investment grade, warned that there seemed to be growing pressure on the bank, and the Treasury, to implement expansionary policies.

Moody's is expected announce a review on Aug. 11.

The rand has weakened more than two percent since the Moody's warning, quickly breaking through technical support levels at 13.00, 13.1200 and 13.3000

Analysts said the break through crucial technical marks and the prospect of further pressure on the economy opened the door for bets against the rand.

In fixed income, the yield on the benchmark paper due in 2026 rose 1.5 basis points to 8.635 percent.

The Johannesburg All-Share Index hit another all-time high in early trade, up 0.09 percent to 55,439 points at 0813 GMT, while the Top-40 index edged up 0.09 percent to 49,083 points.

(Reporting by Mfuneko Toyana; Editing by James Macharia)

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