SA rand falls more than 1,6pc

as nagging problems in Europe, particularly Greece’s debt woes, hit risk appetite anew.
Government bonds were not spared from the sell-off and yields jumped, with the market also looking to Thursday’s interest rate decision where the Reserve Bank is expected to keep the key repo unchanged at 5,5 percent.

The rand touched a session low of 7,5995 to the greenback – its weakest since late July 2010 – and was trading down 0,95 percent at 7,5350.
“It’s basically just a risk-off move given the news about the Greek bailout.
“It’s more about dollar strength than rand weakness,” ETM market analyst Luke Barnett said.

Markets are still nervous about the fallout from a possible default by Greece, which pledged over the weekend to take the tough decisions needed to avoid this but announced no new austerity measures to secure international bailout funds next month.

South African government bonds also fell sharply, with the yield on the four-year bond jumping 16 basis points to 6,94 percent while that for the bond due in 2026 added 15,5 basis points to 8,36 percent.
“Yields are higher for the same reason – a rotation towards safer assets,” Barnett said.

Europe’s debt problems are likely to remain the market’s main focus, but Thursday’s domestic rates decision at around 1300 GMT should also give crucial direction about monetary policy going into next year.
A Reuters poll on Friday showed domestic rates were expected to remain at three-decade lows for longer than seen at the start of the year, when economists expected monetary tightening to resume by the end of 2011 to curb inflation.

All 27 economists surveyed said the Bank’s monetary policy committee would keep the repo steady at 5,5 percent on Thursday, with four seeing a chance of another 50 basis points cut in rates between end of this year and early next year. – Reuters.