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Rand hit as commodity currencies suffer

The rand fell to seven-month lows against the dollar on Monday.

FILE: The rand has been on the back foot in recent weeks. Picture: Reinart Toerien/EWN.

JOHANNESBURG - The rand fell to seven-month lows against the dollar on Monday as commodity-linked currencies bore the brunt of expected weak growth in China, the world's largest consumer of raw materials.

The rand has been on the back foot in recent weeks and was extending losses linked to South Africa's own poor economic fundamentals. This week sentiment is expected to be spearheaded from abroad.

Emerging markets began the week on depressed tone after comments from China's finance minister on Sunday that suggested Beijing may accept lower economic growth rates instead of introducing fresh stimulus.

The rand fell over 0.8 percent to 11.1725 to the dollar, hitting its weakest level since early February.

Australia's currency also hit seven-month lows against the US dollar.

"Signs of a China slowdown will additionally fuel concerns about South Africa's trade balance and demand for raw materials from Asia," said Anisha Arora, an emerging market analyst at 4Cast.

South Africa is running a wide current account deficit and investors are concerned about the need for continued foreign flows into its capital markets to finance it.

With Beijing as South Africa's biggest trading partner, a Chinese slowdown will further aggravate the shortfall.

The rand has also been under pressure since last week's Reserve Bank's decision not to increase interest rates and Governor Gill Marcus' announcement that she will be stepping down at the end of her 5-year term in November.

"Currently risk factors are pointing to further dollar/rand gains," Arora said, expecting next dollar resistance to come in at 11.1810 where prices should start levelling off.

Government bonds gained with the yield climbing 2.5 basis points to 8.185 percent on the 2026 benchmark issue.