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#RandReport: Rand stumbles to 2-week low as Fed jitters kick-in

At 2:30 pm GMT the rand was 0.98% weaker at R11.9100 per dollar, its softest level since 14 February, compared to an overnight close of R11.7875.

Picture: EWN

JOHANNESBURG - South Africa’s rand slipped to its lowest in two weeks on Thursday, succumbing to month-end demand for dollars by local firms as the increasing chance of higher interest rates in the United States lured bulls back into long-dollar positions.

At 2:30 pm GMT the rand was 0.98% weaker at R11.9100 per dollar, its softest level since 14 February, compared to an overnight close of R11.7875.

It was the first time in more than two weeks the rand closed above technical support around R11.80, bringing losses since Monday to 3%, prompting some technical selling as well as portfolio rebalancing by corporates offloading excess rands.

Analysts said the “Ramaphosa effect”, named for the rise in investor confidence and rally in local assets after new president Cyril Ramaphosa took over as chief of the ruling African National Congress in December, was now giving way to global headwinds.

Signs the US Federal Reserve may raise interest rates as many as four times as its economy speeds up, and a slack in demand from China has seen emerging market currencies suffer.

“Investors are now moving into dollar-denominated assets on the back of the stronger US dollar,” said analyst at Peregrine Treasury Solutions Bianca Botes

“We are also seeing an element of fear in the markets as investors are positioning themselves for a risk-off environment by moving out of riskier emerging market assets,” Botes said.

Local economic data was mixed. The Absa purchasing manager’s index showing the private sector rising to its best in ten months, but year-on-year new vehicles fell for a third consecutive month.

Bonds were also softer, with the yield on the benchmark paper due in 2026 up 0.5 basis points to 8.13%.

In the equities market, the Johannesburg All-share index closed 0.69% down to 57,923 points, while the blue-chip Top 40 index fell 0.72% to 51,011 points.

Leading the decliners, retailer Steinhoff International Holdings, hit a one-week low after reporting a 5% fall in quarterly revenue after market close on Wednesday and said working capital “dried up”.

Steinhoff closed 12.07% down to R5.10.

Gold stocks weakened as the bullion price fell to a two-month low on expectations for further increases in US interest rates. The index declined 0.25%.

Tightening monetary policy tends to weigh on gold because it increases the opportunity cost of holding non-yielding assets while boosting the dollar, in which the metal is priced.