South African Rand Slumps To Near 6-Month Low, Bonds Weaken

By Olivia Kumwenda-Mtambo

South Africa’s rand slumped more than 2 percent to a near six-month low against the dollar and government bonds weakened sharply on Friday, dragged down by weak economic growth and global investors shying away from riskier assets.

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At 0844 GMT, the rand traded at 13.2400 per dollar, 1.7 percent weaker than its close on Thursday, after earlier falling more than 2 percent to session low of 13.2875.

The currency was at its weakest level against the dollar since Dec. 18, Thomson Reuters data showed, extending losses suffered in the previous session.

The yield for the benchmark government bond due in 2026 rose 21 basis points to 9.04 percent, its weakest since December.

Wider appetite among investors for riskier assets has waned on bets that Europe’s massive monetary stimulus is nearing an end, compounded by uncertainty over trade relations ahead of a key meeting of global leaders.

Analysts said the local unit suffered the most as sentiment was also hurt by concerns over the economy.

“Although there was broad-based weakness in EM, the rand was one of the worst-performing currencies, as peers raised interest rates and concerns around South Africa’s current account deficit grow,” Rand Merchant Bank economist Mpho Tsebe said in a note.

 “At the same time, (first quarter) GDP figures and April’s manufacturing data were disappointing.”

Data on Tuesday showed South African first-quarter gross domestic product (GDP) shrank 2.2 percent, led by a slowdown in agriculture, mining and manufacturing.

NKC African Economics analysts said the rand’s performance also reflected “waning ‘Ramaphoria’”, referring to optimism around the election of President Cyril Ramaphosa in February.

After Jacob Zuma was forced out as leader by the ruling party in February, Ramaphosa pledged to clean up governance, deal with high unemployment and improve basic services, igniting a wave of optimism.

But the recent poor economic data has eroded some of the enthusiasm in Africa’s most industrialised economy.

 On the stock market, the Top-40 index was down 0.6 percent while the broader all-share fell 0.5 percent.

Bidvest, seen a barometer for the South African economy, topped the decliners list on the benchmark index, falling nearly 3 percent. Shortly after the market closed on Thursday, the industrial group said trading profit was growing at a slower pace than reported in December.

 Editing by Alexander Smith and Jon Boyle

Source: af.reuters.com

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