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THE RAND bounced back late yesterday as investors bought the currency cheap ahead of a policy decision by the US central bank that could send the greenback higher.
At 5pm, the rand bid at R13.1905 to the dollar, compared to an overnight slump to a one-week low of near R13.40 after President Cyril Ramaphosa said the ruling party would press ahead with amending the constitution to speed-up land reform.
“The land expropriation issue has largely been priced-in, especially as the rhetoric is being dialled up,” said Halen Bothma of ETM Analytics.
Domestic assets were rattled by the news with the rand sliding about 2 percent, bond yields rising and the cost to insure against a credit default also climbing.
Christopher Shiells, a senior emerging market analyst at London-based Informa Global Markets, said the threat to property rights would further dent investor sentiment, specifically foreigner investors as it created a big risk and hurdle to get over.
“I think it is a move to just clarify the constitution, which it has been argued already allowed for the seizure of land without compensation,” Shiells said.
The effect, however, did not last into the session and the rand gained momentum, helped by positive manufacturing activity and some short-positioning ahead of the conclusion of the US Federal Reserve’s policy meeting later in the evening.
Bonds ended the day weaker, with the yield on the benchmark paper due in 2026 adding one basis point to 8.62 percent.
Meanwhile, on the bourse shares closed slightly weaker after being led lower for most of the day by banks on the back of Ramphosa’s announcement of ANC’s intention to amend the constitution to allow for expropriation of land without compensation.
The JSE Top40 index was down 0.07 percent to 51 276.97 points, while the all share index was down 0.06 percent to 57 399.53 points.
The banking index was down as much as 1.1 percent on the day but ended 0.6 percent lower.
Arcelor Mittal bucked the trend after reporting a swing back to a modest profit in the first half of the financial year, boosted by higher steel prices and upbeat sale volumes. The steelmaker jumped 14.38 percent to close at R3.66.