#RandReport: Rand stretches gains, EOH drags stocks down

By 15:00 GMT the rand had gained 0.2% to 12.9300 compared to its close of 12.9550 overnight in New York.

Picture: EWN.

JOHANNESBURG - South Africa's rand added to recent gains on Tuesday, remaining in favour with investors in search of higher yields as the dollar eased on dimming hopes of interest rate hikes soon.

Stocks were lower with South Africa's largest technology group EOH Holdings falling 9% after allegations of corruption surfaced. The firm denies wrongdoing.

By 15:00 GMT the rand had gained 0.2% to 12.9300 compared to its close of 12.9550 overnight in New York.

The local unit burst through the 13.00 psychological mark on Monday on its way to a two-week best as last week's decision by government to suspend new mining laws combined with weak United States economic data soothed investor anxieties.

High-yield but riskier assets were buoyed on the day by the dollar's continued slide following weaker-than-expected housing data and the collapse of a health bill.

The rand has gained more than 5% since last Tuesday and is seen by some by analysts breaking through technical resistance around 12.92 if consumer inflation data on Wednesday keeps trending lower.

"The CPI data on Wednesday will really give clues on the direction of the trend, and it's unlikely to surprise in either direction," said interest rates specialist at Rand Merchant Bank André Eerenstein.

Eerenstein said the chances of a rate cut by the central bank on Thursday were higher than the previous policy meeting, with markets pricing in between 30 to 40% probability of a cut.

On the bourse, the benchmark Top-40 index fell 1.2% to 46,927 points while the All-Share index weakened 1.05% to 53,261 points.

EOH was the biggest faller on the Johannesburg All-Share index, dropping 8.81% to R115.80 a share, after an opinion piece in Business Report newspaper accused the company of being involved in impropriety in its contracts with South Africa's welfare agency.

"It's a very controversial article and paints them in a very negative light, that creates uncertainty and markets don't like it. Shareholders have had a knee-jerk reaction and there's been a sell-off," Independent Securities trader Ryan Woods said.

Supermarket group Shoprite dropped 2.71% to R200 per share after it said trading conditions remained challenging in the second half of its financial year.

Bonds firmed, with the yield for the benchmark government bond due in 2026 down 1.5 basis points at 8.63%.