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Rand tumbles in emerging market sell-off

The currency firmed slightly after data showed the domestic trade deficit narrowed to R2.91 billion.

FILE: The currency firmed slightly after data showed the domestic trade deficit narrowed to 2.91 billion rand. Picture: EWN.

JOHANNESBURG - The rand tumbled to its weakest level against the dollar in over a week on Friday as a sell-off of emerging market currencies wiped out the gains it made after South Africa's trade shortfall surprisingly narrowed sharply in September.

The currency firmed slightly after data showed the domestic trade deficit narrowed to 2.91 billion rand, compared with a 16.75 billion shortfall in August, but weakened in subsequent trade and was pushed past the 11.000 per dollar mark.

By 15:22 GMT the rand had fallen 1.65 percent to 11.043 per dollar, its weakest level in seven sessions, after closing at 10.8675 in New York.

The index that measures a basket of emerging currencies against the dollar showed a 0.54 percent decline against the US currency.

The dollar index, a measure of the greenback against major currencies, was up 1.14 percent.

The rand, which made recent gains after the Bank of Japan's surprise expansion of its massive bond-buying programme gave the South African market a boost, on Friday failed to hold below the 10.84 resistance level it has touched three times this week.

Local bonds shed their early momentum, with the yield on the benchmark issue due in 2026 dropping only 2 basis points to 7.89 percent after recording a year-low yield in early trade.

"The [gain] in the rand was a little bit of a knee-jerk reaction. The structural problems plaguing the rand are here to stay," said Cheslyn Francis, a market analyst with Afrifocus.

"The narrow trade deficit was just a spot in the ocean."

Earlier, Reserve Bank Deputy Governor Lesetja Kganyago told a conference of global central bankers in Pretoria that South Africa's high unemployment rate, which stands at 25.4 percent, reflected a rigid labour market and that there was little the bank's policies could do to affect it.