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#RandReport: Rand hits record low, central bank mulls intervention

The rand recorded its biggest daily loss in 19 months, touching 14 to the dollar, its weakest level on record.

Charts showed that the rand had broken through the top of its four-year upward sloping channel trend line. Picture: EWN.

JOHANNESBURG - The rand hit an all-time low and stocks fell sharply on Monday, as rising concerns about waning growth in China hit commodity-linked currencies, prompting the central bank to say it may intervene to try to quell volatility.

The weaker rand is likely to fuel inflation, putting pressure on the central bank to raise domestic rates further despite an economy struggling to grow in the face of South Africa's worst power crisis in seven years.

The rand recorded its biggest daily loss in 19 months, touching 14 to the dollar, its weakest level on record according to Thomson Reuters data.

By 1545 GMT it was trading at 13,2, down 1,81 percent from Friday's close.

The benchmark top-40 share index closed about three percent lower, in a broad-based decline.

Government bonds were not spared the sell-off, with the yield for the 2026 benchmark pushed to its highest in more than two months, reinforcing the case for a further interest rate rise this year.

While not spelling out the nature of intervention it was considering, the central bank said excessive rand volatility was a concern and could warrant action.

Ricardo da Camara, an economist at ETM Analytics said the central bank did not have enough foreign currency reserves to stem the sell-off nor could it raise rates at this stage.

"If the market really wants to sell the rand it is going to do so. So the [South African Reserve Bank] SARB would really be wasting their reserves trying to fight the markets," he said.

"A simple 25 basis point hike in these conditions won't necessarily do anything. It would have to be more pronounced, 50, 75 or even 100 basis points, but that would just kill growth," da Camara said.

The central bank raised the benchmark repo rate by 25 basis points to 6 percent in July, the first increase in a year, on signs inflation is steadily edging towards the top end of a three to six percent target band.

The rand was among the weakest of 25 emerging market peers as investors sold off high-risk assets amid worries about the impact of slowing global growth in the world's No. two economy.

Chinese stocks plunged more than eight percent on Monday, a tumble rooted in investor disappointment that Beijing did not announce expected policy support over the weekend after China's main market indexes shed 11 percent last week.

The rand, which is down more than 15 percent against the dollar this year, has been particularly vulnerable because of South Africa's weak fundamentals, including a wide current account balance and sluggish growth.

Charts showed that the rand had broken through the top of its four-year upward sloping channel trend line.

"A close above 13,50, being the top channel line level, on a weekly basis would ensure further woes for the rand over the next couple of weeks/months," Standard Bank trader Warrick Butler said.

Fixed income yields rose across curve, with the benchmark paper due in 2026 adding 30 basis points to 8,545 percent, a high last reached in mid-June.