Rand stumbles on US rate hike fears

THE rand came under renewed pressure on Friday after a US Federal Reserve official beat the drum of an interest rate hike, boosting the dollar.

“My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalisation of monetary policy,” said Boston Federal Reserve Bank president and CEO Eric Rosengren, who is a voting member of the Fed’s policy committee.

The rand slid 2% against the dollar to R14.44/$ following the comments, which again exposed the vulnerability of the local currency.

As recently as Thursday, the rand looked likely to break the R13.80/$ barrier before subsequently weakening.

The rand is caught between global and domestic forces, with the unresolved matter between the Hawks and Finance Minister Pravin Gordhan likely to generate volatility in the weeks ahead.

“We have seen a week that has been devoid of any market-jarring political events in South Africa,” said MyWealth CEO Devin Shutte.

The weaker rand played into the hands of rand-hedge industrial and commodity shares, but this was not enough to boost the All Share index, which ended marginally weaker for the week at 53 347.30 points.

Gold stocks, which have by far outpaced the broader market this year, ended lower for the fifth consecutive week while banks outperformed with a 3% gain.

Aspen Pharmacare was the biggest loser in the Top 40 index after the generic drugmaker said its full-year earnings would be affected by an R870 million one-off currency-related loss in Venezuela.

The stock dropped 9% in the two days that followed the trading update on Thursday, wiping out about R15-billion of the company’s market value.

The Reserve Bank’s quarterly bulletin on Tuesday, along with local retail sales a day later, will determine the shortterm path for the markets, particularly the rand.