South African rand, bonds hit as weak global growth worries investors

The yield on the benchmark government bond due in 2026 hit a session high of 8.145 percent.

South African currency. Picture: Taurai Maduna/EWN

JOHANNESBURG - The rand touched its weakest level in more than a week and government bonds fell sharply in a volatile Thursday session as investors fretted about weak global growth prospects.

The yield on the benchmark government bond due in 2026 hit a session high of 8.145 percent - up 16.5 basis points from the previous day's close - before coming back to finish at 8.105 percent.

The rand traded at 11.0865 to the dollar by 1514 GMT, down 0.22 percent from where it ended on Wednesday, after earlier falling more than 1 percent to 11.1995. This was the local unit's softest since 8 October, according to Thomson Reuters data.

The local volatility reflected investors' worries that prospects for the world economy, particularly in Europe, a key trading partner for South Africa, could be worse than earlier expected.

"The world seems to be concerned about global growth, but we're getting a slightly better picture out of the United States, and that's lending some support to the dollar," said Nilan Morar, head of trading at Global Trader.

"The volatility on equity markets is also not helping much."

The rand has also come under pressure from recent data suggesting that economic growth in China, a key importer of South African minerals, is cooling.

On the local front, market players are bracing for what are likely to be downgrades to South Africa's GDP growth and budget deficit forecasts, when Finance Minister Nhlanhla Nene presents his maiden budget statement to Parliament next week.