Politics caps rand revival

Domestic pressures prevail

THE rand firmed against the dollar for a third straight session yesterday as US interest rate fears receded and, although risks around domestic politics capped gains, it traded nearly 3% above last week’s one-month low.

The currency was one percent higher than Friday’s close at 14.3785/dollar by deadline, rallying with other emerging markets after weak US jobs data trimmed expectations that the Federal Reserve would raise rates this month.

Government bonds yields eased with the benchmark 10year paper dropping 9 basis points to 8.85%.

Stocks were barely changed from last week’s close, with the retail sector under particular pressure after a weak trading update from industry barometer Mr Price.

The rand has clawed back some of the heavy loss incurred on August 23 on news that Finance Minister Pravin Gordhan was under investigation, triggering fears he might be charged for his role in setting up a spy unit when he ran the revenue service.

But analysts said political risk remained elevated, as investors worried over political interference in the running of Africa’s most industrialised economy.

Reforms

“Fear (about Gordhan’s fate) does not bode well for implementing the reforms identified by ratings agencies as necessary to lift the economic growth rate and sustain our investment grade rating,” Old Mutual analysts, Dave Mohr and Izak Odendaal, said in a note.

On the stock market, the benchmark Top- 40 index ticked up 0.23% to 47 078 points, while the All-Share index was up by the same amount to 53 622 points.

This was in spite of retail shares extending losses, with Mr Price falling 2.36% to R163.01 after flagging lower half-year earnings last week.

Fashion group Truworths International shed 1.54% to R76, while consumer goods distributor Massmart Holdings weakened 1.32% to R126.

“If Mr Price, which is regarded as the superstar of the retail sector... is battling, then maybe the consumer is under more pressure than we realised,” Cratos Capital equities trader Greg Davies said.

The losses were offset by gains in the resources sector, where a firmer platinum price boosted Royal Bafokeng Platinum 1.54% to R49.35, while Impala Platinum was up 1.42% to R67.34. Volumes were below average, with 215 million shares changing hands compared with a 2015 daily average of 296 million.