Rand softer on investor caution, JSE falls
THE RAND weakened yesterday as an upcoming conference of the ANC to pick a new leader and bets of higher interest rates in the US kept investors cautious.
Stocks dropped with investment holding firm PSG Group among the decliners after sources told Reuters that Steinhoff was considering PSG and KAP Industrial stake sales to lift liquidity.
At 5pm, the rand bid at R13.6593 to the dollar, 6.94c softer than at the same time on Monday.
Traders said the currency was expected to trade in ranges ahead of the ANC conference which kicks off on Saturday. The party will crown a new leader to succeed President Jacob Zuma, who can remain president of the country until 2019.
The two front-runners to succeed Zuma are Deputy President Cyril Ramaphosa and former chair of the AU Nkosazana Dlamini Zuma.
“Rand trade might be boring now but it is expected to be explosive over the weekend,” Rand Merchant Bank analyst, John Cairns, wrote in a note.
“One-week implied volatility on USD/ZAR has jumped to over 30 percent, implying the market now puts over a 50 percent probability of a 5 percent move in the rand over the week, that is to under (R)13.00 or over (R)14.30.”
Globally, investors expect the US Federal Reserve to hike interest rates at its two-day policy meeting that ends today. Higher US rates often drain capital away from higher-yielding, but riskier emerging markets, weighing on their currencies.
In fixed income, the yield for the benchmark government bond due in 2026 rose 5 basis points to 9.275 percent, reflecting weaker bond prices.
On the bourse, the benchmark JSE Top40 index declined 0.77 percent to 51 312.31 points, while the broader all share index was down 0.82 percent to 57 523.62 points.
PSG, in which Steinhoff owns about 25 percent, closed 3.25 percent weaker at R242.30 after sources said Steinhoff was considering selling stakes worth a combined $1.4 billion (about R19bn) in it and KAP Industrial to help plug a liquidity gap at the retailer.
“We could see some selling pressure coming in, guys (Steinhoff) have to sell some shares to raise money,” said BP Bernstein trader, Vasili Girasis.