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#RandReport: Rand slips on trade war fears, stocks down on profit-taking

While traders worry over the possible trade war, the scenario continues to favour long-rand bets, especially after Tuesday’s economic growth data surprised on the upside.

FILE: Picture: Christa Eybers/EWN.

JOHANNESBURG - South African rand weakened on Wednesday along with other emerging markets as investors dumped risky assets after a key free trade advocate in the White House resigned, fanning fears US President Donald Trump will trigger a trade war.

Stocks were knocked by profit-taking in the banking sector after strong gains in the previous session.

At 14.45 GMT, the rand traded 0.62% weaker at 11.7950 per dollar, having hit a session-low of 11.9200.

While traders worry over the possible trade war, the scenario continues to favour long-rand bets, especially after Tuesday’s economic growth data surprised on the upside.

The economy grew 3.1% in the October-December period against expectations of 1.8%.

“This is good news in view of Moody’s rating review at the end of the month - as higher growth facilitates the urgently required consolidation of the public finances,” said analysts at German-based Commerzbank.

“However, we are sceptical whether this high momentum is sustainable,” they said in a note.

Traders said the rand would likely remain in a range between 11.50 and 11.95, with investors on the defensive and keeping an eye on the possible capital reversals if a trade war breaks out.

In fixed income, the yield for the benchmark government bond due in 2026 was up one basis points to 8.12%.

On the bourse, the benchmark Top-40 index weakened 0.48% to 52,005 points while the All-Share index lowered 0.47%to 58,962 points.

The banking sector lost 1.6%, leading the bourse lower amid profit-taking after the sector, which is usually seen as an economic barometer, ended higher on Tuesday on the back of the robust GDP data.

“Yesterday we saw a bit of a push in some of the stocks, so we are seeing a breather or bit of profit taking coming in here,” said Independent Securities trader Ryan Woods.

FirstRand fell 4% to R71.94, Capitec Bank shed 1.8% to R851.65 and Standard Bank weakened 0.5% to R223.84.

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