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Rand weakens as focus shifts to China-US trade talks

South Africa relies on exports to China and the United States for the bulk of its revenue, and their trade dispute risks hurting the country’s already weak economic prospects.

South African rand.  Picture: Christa Eybers/EWN

JOHANNESBURG - The rand weakened against the dollar on Monday after China was reported to be reluctant to agree to a broad trade deal with Washington, casting doubts on trade talks due to start this week.

The United States and China are set to meet for trade negotiations in Washington on 10-11 October, although latest reports suggest Beijing may be looking to restrict the scope of any deal.

“After pulling back towards R15.00 against the dollar over the last few days on growing expectations of another US interest rate cut, the domestic currency fell prey, again, to risk-off sentiment over global trade concerns,” Investec chief economist Annabel Bishop wrote in a note.

“The domestic currency may still attempt to break through R15.00 rand in the run-up to the Federal Open Market Committee meeting at the end of this month if risk aversion subsides.”

South Africa relies on exports to China and the United States for the bulk of its revenue, and their trade dispute risks hurting the country’s already weak economic prospects.

At 1659 GMT, the rand weakened 0.56% to R15.1550 per dollar, compared to its close of R15.0700 on Friday.

Bishop said on the domestic front the medium-term budget policy statement on 30 October was being seen as casting a pall over the rand’s fortunes as was a potential review of the country in early November by credit rating agency Moody’s.

In the equities market, pharmacy and healthcare retailer Clicks Group topped the gainers after revising its earnings forecast range upwards, pushing its shares up 13.54% to R247.75 rand.

Clicks now expects that diluted headline earnings per share for the year ended 31 August, will increase by between 15% and 18%, compared to the previous forecast of between 10% and 15%.

Petrochemicals company Sasol was the second biggest gainer on the blue-chip index, rising 6.47% to R268.52 as it benefited from rising oil prices.

Brent crude rose 78 cents or 1.3% to $59.15 a barrel by 1550 GMT, while US West Texas Intermediate (WTI) crude was at $53.74, up 93 cents or 1.8%.

The Johannesburg All-Share index closed 1.34% higher at 54,714 points, while the Top-40 index climbed 1.38% to 48,635 points.

In fixed income, the yield on the benchmark government due in 2026 was up by 3 basis point to 8.215%.

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