Picture: REUTERS
Picture: REUTERS

The rand stabilised on Wednesday morning, a day after dropping by the most against the dollar since October, signalling that foreigners were trimming their exposure to South African assets.

The rand’s moves were mostly due to the resurgent dollar, which has recently been a destabilising force in emerging-market space.

The strength in the greenback came as the yield on the benchmark US 10-year yield touched 3.09% for the first time since the middle of 2011, implying that more interest rates could be on the cards.

Standard Bank trader Warrick Butler said in an e-mailed note that investors who were "heavily positioned" in emerging markets were starting to feel the strain of interest rate compression as a result of big moves in US bond rates.

The rand plummeted more than 2% against the dollar on Tuesday, as the Turkish lira hit a new low. The lira was also reacting to domestic concerns.

Markets were also keeping a close watch on oil prices, which hovered at the multi-year highs, fuelling concern about accelerating inflation.

"Buy US dollar and wear diamonds. This is advice that seemed to work throughout most of the Zuma administration and now seems to be back on the cards as record US dollar shorts continue to be closed out," said Rand Merchant Bank analyst Michelle Wohlberg.

The volatility in global markets and its effect on the rand is likely to be highlighted when the Reserve Bank delivers its interest-rate decision next week.

At 10.05am, the rand was at R12.5159 to the dollar from R12.5662, R14.8253 to the euro from R14.8745 and at R16.9023 to the pound from R16.9712.

The euro was at $1.1847, from $1.1838.