Rand falls as US rate hike almost certain

THE rand weakened yesterday, tracking the euro and other emerging-market currencies as the dollar’s recent rally was reignited by renewed bets of higher lending rates.

Stocks ended higher, led by financials and retailers.

At 15:56 GMT, the rand was 0.24% weaker at R12.5400 to the dollar, compared with a close of R12.5100 on Friday, in New York.

The dollar climbed back towards its highest level of this year yesterday with more investors going long as the probability of a rate hike by the US Federal Reserve shifted to near certain, diminishing the appeal of highyield currencies such as the rand.

Lower global prices for gold, one of South Africa’s key exports and sources of foreign currency, also weighed on the rand. Spot gold was down 0.2%. “It is worth noting that at last week’s close of R12.50, the rand is still somewhat stronger than a year ago, and it is therefore premature to worry about upward pressure on inflation,” said analysts at Old Mutual in a note.

Bonds were firmer, with the yield on the benchmark paper due in 2026 down 2.5 basis points to 8.32%.

“Where the weaker rand does help is on the JSE, where the largest companies generate most of their revenues abroad,” said Dave Mohr and Izak Odendaal, who are investment strategists at Old Mutual.

The bourse edged higher, but gold stocks were down, led by Sibanye Still-Water, which tanked 7.69% to R9.97.

The FTSE/JSE All Share Index was up 0.4% to 57 881 points, while the benchmark FTSE/ JSE Top 40 Index rose 0.54% to 51 148 points.

Sibanye’s shares fell after seven miners died at one of its Johannesburg gold mines following an earthquake on Thursday that caused a cave-in.

“They have taken quite a big knock and obviously the market has taken the share down on the back of those fatalities,” said Ferdi Heynke, a portfolio manager at Afrifocus Securities.

Overall, gold stocks ended weaker, with the gold miners’ index down 2.36% on the day.

Capitec and Nedbank were both up about 2% on the day, to R869 and R297 respectively.

Food services and logistics firm Bidcorp, which has businesses in Britain, Australia and the Middle East, topped the retailers on the blue-chip index, rising 3% to R280. – Reuters