South Africa’s rand reversed earlier gains inspired by domestic economic data, succumbing to pressure from reduced appetite for emerging market assets after Standard & Poor’s downgraded Brazil and ahead of a slew of Chinese data.
On the local bourse, the blue-chip Top-40 futures index was flat, a move likely to translate in the actual share index opening little changed at 0700 GMT.
At 0630 GMT the rand softened by 0.2 percent to 13.6500 per dollar, having climbed more than one percent in the previous session after factory and mining data surprised on the upside, both rising 5.6 percent year-on-year in July.
“Disregard the strong annual growth readings. Factories are dealing with weak GDP growth, power outages, and slack external demand,” analysts at NKC African Economics said.
The rand faces headwinds from Chinese industrial output, retail sales and investment data due on Sunday, with investors searching the figures for clues on the extent of the slowdown in the world’s second-largest economy.
S&P’s unexpected decision to cut Brazil’s credit rating to junk is also set to dampen investor appetite for risky assets in the run-up to the U.S. Federal Reserve’s policy meeting next week, where the bank is expected to raise rates for the first time in nearly decade
Yields on government bonds were lower in early trade, with the benchmark issue due in 2026 dropping 2.5 basis points to 8.46 percent.