South African rand weakens as dollar firms amid economic uncertainty

PUBLISHED: Tue, 25 Oct 2022 08:46:50 GMT
Anait Miridzhanian and Bhargav Acharya
Reuters
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South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg, file. REUTERS/Siphiwe Sibeko

JOHANNESBURG, Oct 24 (Reuters) – South Africa’s rand fell on Monday, following other emerging market currencies, as the U.S. dollar held firm amid global economic uncertainty.

At 1538 GMT, the rand ZAR=D3 traded at 18.4275 against the dollar, 1.75% weaker than its previous close.

The U.S. dollar made gains against other major currencies, with the dollar index =USD up about 0.13% at 111.97.

A further escalation of the Russia-Ukraine war, policy worries in China following President Xi Jinping’s appointment of loyalists to the government, and Britain’s contest for a new prime minister, have all unsettled markets in recent days.

“South Africa… continues to see a score of risks from the external environment, including ongoing monetary policy tightening in advanced economies, which is driving rising domestic borrowing costs, while high inflation also adds to the pressure on bond yields,” Investec analyst Annabel Bishop said in a research note.

She said domestic factors including problems at state logistics group Transnet and state power utility Eskom had also contributed to rand weakness.

This week, local investor attention turns to the South African government’s mid-term budget. A Reuters poll published on Friday predicted the National Treasury would be able to trim this year’s projected budget deficit thanks to buoyant mining receipts.

Shares on the Johannesburg Stock Exchange fell, weighed down by market heavyweights Naspers NPNJn.J and Prosus PRXJn.J, which slumped 17.40% and 15.19%, respectively.

They hold a near 29% stake in Tencent Holdings 0700.HK, whose shares fell along with other prominent Chinese tech companies, as President Xi’s new leadership team sparked investor concerns over private sector growth.

Overall on the stock exchange, the Top-40 .JTOPI index closed 1.06% lower, while the broader all-share .JALSH index ended down 0.86%.

The government’s benchmark 2030 bond ZAR2030= was down, with the yield up 2.5 basis points to 11.050%.

(Reporting by Anait Miridzhanian and Bhargav Acharya; Editing by Mark Potter)

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