The South African rand fell more than 1,7% to a fresh three-week low against the dollar on Wednesday as Europe’s debt problems kept investors wary of risk and local oil importers bought dollars.
Government bonds also had a tough session, frustrated by the weak rand and local selling at the front end of the curve. Stocks closed slightly lower, tracking United States (US) markets weaker after the release of trade deficit figures for the United States.
South African shares took heart from better-than-expected manufacturing numbers earlier in the session but some analysts said the data showed the sector was in a hesitant recovery and the outlook for the rest of the year was uncertain.
The rand fell to R6,855 against the dollar, its weakest in three weeks, from Tuesday’s New York close of R6,7353.
“We have seen some oil importers today so the rand market was a little bit short of dollars and we’re now seeing the results of that,” said David Gracey, trader as Investec.
He said the rand was also reacting to a slight sell-off in the gold price, softer US equity markets and the weaker euro.
The volatile rand is retracing a three-year high of R6,5410 touched early last week, giving up 3% to current levels.
Government bonds ended weaker, with the short end of the curve under pressure as local accounts liquidated long positions, traders said. The four-year bond yield added five basis points to 7,61% while the 2026 note was yielding two basis points more at 8,555%.
“There has been consistent selling all day. Most of the activity has been on the R157s — there have been buyers of R186s and R208s, but the front end of the curve has been really well offered,” said a local bond trader.
“The guys were looking for liquidity, and the R157s were the most liquid point today”.
The dealer said foreign investors were more interested in the longer end of the curve, which had helped prop up the four-year R186 bond.
Foreigners bought R4,8-billion of local debt last week, the most buying seen in three weeks, according to data from the JSE.
Markets are awaiting an interest rate decision from the South African Reserve Bank on Thursday, with policymakers seen keeping the benchmark repo rate unchanged at 5,5%.
Stocks hit by US
The JSE Top-40 index of blue chips, which had spent the morning session in positive territory, closed 0,12% lower to 28 810,24 and the broader All-share index shed 0,11% to 32 051,35.
“We swung from being quite positive into negative trend after the news that the US deficit was worse than expected,” said Ferdi Heyneke, a portfolio manager at Afrifocus Securities.
The US trade deficit widened more than forecast in March as rising oil prices helped push imports nearly 5% higher, while exports leapt to a new record, a US government report showed.
On the JSE, ArcelorMittal South Africa tumbled 3,03% to R79.61 after the steelmaker reported a 74% drop in first-quarter profit, as higher coal and iron ore prices drove up costs.
Bourse and mining heavyweight BHP Billiton shed 0,52% to R269,30 and rival Anglo American lost 1,47% to R335 as copper slipped.
But Richemont’s Johannesburg-traded shares jumped 2,97% to R43,62 on expectations the Swiss luxury goods firm will post strong annual results next week. — Reuters