South Africa’s rand rallies, stocks slide to 10-month low

JOHANNESBURG (Capital Markets in Africa) – South Africa’s rand rallied to its firmest in nearly a month on Tuesday, brushing off a poor economic growth print as a weaker dollar and bets on improvement in commodity prices boosted appetite for emerging currencies.

Stocks ended lower in a broad-based sell-off that sent the benchmark index to its lowest level in nearly 10 months as weaker metal prices pressured heavily weighted mining shares.

By 1530 GMT the rand had strengthened 0.84 percent to 13.6150 per dollar, its firmest level since November 10.

The dollar index slipped to near a three-week low against a basket of currencies, mostly pressed by investor focus on the European Central Bank’s policy meeting on Thursday.

The rand gained more than one percent to a session high 13.5850 despite growth data showing the economy only grew 0.2 percent in the third quarter, before pulling back slightly as technical factors kicked-in.

“There is some resistance around the 13.60 mark, so you’re likely to see the rand test 13.80 before we get some more strengthening,” head of foreign exchange at Capilis Asset Management Giacomo Bonavera said.

“Looking at the commodity cycle going forward, a lot of guys are pretty bullish. And higher commodity prices are mostly supportive of the rand,” said Bonavera.

Traders said the rand was also still benefiting from S&P Global ratings decision last Friday to keep the country’s debt score on investment level.

Government bonds were firmer, with the benchmark paper due in 2026 cutting 3 basis points to 8.94 percent.

On the bourse the blue-chip JSE Top-40 index was down 1.78 percent at 42,422, a level last seen in February. The broader All-share index lost 1.56 percent to 48,935.

Mining companies were among the biggest decliners as industrial metal prices such as copper and zinc retreated on concerns prices have strayed into an overbought territory following a surge over the last month.

Anglo American was the worst performing stock on the Top-40 index, skidding 4.5 percent to 205.81 rand while rival BHP Billiton dropped 3.81 percent to 226 rand.

Trading volumes were low with 225 million shares changing hands, below last year’s daily average of 296 million shares.

Source: Reuters Africa News