Rand slides on land reform concerns

JOHANNESBURG – South Africa’s rand slid further yesterday, partly in response to the stronger dollar but also reflecting offshore flows and emerging concern over possible changes to land restitution in the country, traders said.

At 11h00 the rand was trading at 6,54/ dollar – nine cents weaker than its previous close in Johannesburg, after firming as far as 6,41/ dollar in thin and nervous trade early in the session. “I think there’s been offshore interest to buy dollar/rand and its kicked the market higher [weaker].People are reluctant to hold positions because of high volatility and are trying not to get hurt in the first week of trade,” a local dealer said.Dealers also said the rand was responding to media reports in New York and London about changes to South Africa’s process of legal land restitution ahead of the next general election in April.A local newspaper followed up the story on Wednesday.”It’s starting to have an impact on the market.You can see that the issue is becoming an increasing focus ahead of the April elections,” Bank of America emerging markets analyst Callum Henderson said.South African officials have repeatedly said they would not allow Zimbabwe-style land grabs in the country, and followed up on that pledge by evicting illegal squatters from land in a Johannesburg suburb a couple of years ago.But expected changes to laws which would give the agriculture minister the authority to seize and redistribute land stolen from blacks during the apartheid era – even if the white owner refuses to sell it – have fuelled investor concern.”It’s a big issue, especially from the way the offshore market would look at it,” a domestic dealer said.He saw the rand trading between 6,40 and 6,63 for the time being.Modest gains in the dollar against the euro – the currency of South Africa’s main trade partner – also weighed on the rand, dealers said.At 11h20 the euro was trading at $1,2674, well off a record peak of $1,2813 on Tuesday.Earlier on Tuesday, the rand had firmed by 1,8 per cent to 6,2350/ dollar – its best level in a month.Traders said dollar buying by the South African Reserve Bank (SARB) when the rand moved below 6,30/ dollarr, which with import orders helped push it weaker again.The SARB has repeatedly said it is using gains in the volatile rand as an opportunity to buy dollars and build up its meagre foreign exchange reserves, but says it has no intention of affecting the value of the unit.Analysts are divided on whether the rand can extend a sustained two-year rally, which saw it appreciate by 28 per cent against the dollar in 2003.-Nampa-Reuters”I think there’s been offshore interest to buy dollar/rand and its kicked the market higher [weaker]. People are reluctant to hold positions because of high volatility and are trying not to get hurt in the first week of trade,” a local dealer said. Dealers also said the rand was responding to media reports in New York and London about changes to South Africa’s process of legal land restitution ahead of the next general election in April. A local newspaper followed up the story on Wednesday. “It’s starting to have an impact on the market. You can see that the issue is becoming an increasing focus ahead of the April elections,” Bank of America emerging markets analyst Callum Henderson said. South African officials have repeatedly said they would not allow Zimbabwe-style land grabs in the country, and followed up on that pledge by evicting illegal squatters from land in a Johannesburg suburb a couple of years ago. But expected changes to laws which would give the agriculture minister the authority to seize and redistribute land stolen from blacks during the apartheid era – even if the white owner refuses to sell it – have fuelled investor concern. “It’s a big issue, especially from the way the offshore market would look at it,” a domestic dealer said. He saw the rand trading between 6,40 and 6,63 for the time being. Modest gains in the dollar against the euro – the currency of South Africa’s main trade partner – also weighed on the rand, dealers said. At 11h20 the euro was trading at $1,2674, well off a record peak of $1,2813 on Tuesday. Earlier on Tuesday, the rand had firmed by 1,8 per cent to 6,2350/ dollar – its best level in a month. Traders said dollar buying by the South African Reserve Bank (SARB) when the rand moved below 6,30/ dollarr, which with import orders helped push it weaker again. The SARB has repeatedly said it is using gains in the volatile rand as an opportunity to buy dollars and build up its meagre foreign exchange reserves, but says it has no intention of affecting the value of the unit. Analysts are divided on whether the rand can extend a sustained two-year rally, which saw it appreciate by 28 per cent against the dollar in 2003.-Nampa-Reuters