July 6, 2012 / 1:03 PM / 5 years ago

S.Africa's rand plumbs 7-day lows, bonds weaken

JOHANNESBURG (Reuters) - South Africa’s rand fell as much as 1.75 percent to a 7-day trough against the dollar on Friday as weaker-than-expected U.S. jobs numbers hit global risk sentiment, sending investors scurrying to safe haven assets.

A man counts South African rand notes outside a stadium, June 15, 2010. REUTERS/Michael Buholzer

Government bonds moved in tandem, snapping three days of gains with yields pulling back from recent historic lows.

The rand hit a session low of 8.2873 to the greenback, its softest level since June 29, and was down 1.47 percent at 8.2650 by 1533 GMT compared with Thursday’s close at 8.1450.

“We’re just following the euro. People had put euro selling on hold while we waited for the U.S. non-farms, but the euro’s been moving steadily lower since then,” RMB rand trader Jim Bryson said.

“We gained earlier this week on the whole risk-on scenario, we’re now suffering somewhat from the risk-off scenario. But the rand’s still very much in ranges, we’re not breaking levels at which we are going to enter the weekend dramatically.”

The rand, highly vulnerable to global volatility because of the very liquid nature of local markets, has wiped out most of this week’s earlier gains that had taken it to 7-week highs against the greenback.

It was sitting near the bottom of a basket of 20 emerging market currencies tracked by Reuters on Friday, outperforming only the Polish zloty and the Hungarian forint.

Government bonds were not spared the risk sell-off, and benchmark yields closed higher for the first time in three days.

The three year paper added five basis points to 5.96 percent while that for the 14-year paper was 6.5 basis points higher at 7.865 percent.

Yields hit record lows earlier in the week as foreigners sought higher returns in emerging market debt, but analysts say local paper is vulnerable to a sudden reversal amid fears of a ratings downgrade for South Africa over policy uncertainty.

Yet foreign accounts hungry for yield have continued to pour money into the country, with inflows so far this year up 60 percent over the same period in 2011.

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