South Africa's rand recovers, stocks to open weaker

by Reuters 0

South Africa's rand slips as U.S. Fed hike bets return

South Africa’s rand staged a modest recovery on Tuesday after tumbling to a new record low, helped higher by a pause in the dollar’s run to a seven-month peak.

Stocks are set to open at least 231 points lower as equity futures on South Africa’s blue-chip Top-40 index, which often act as a precursor of the actual index, fell 0.48 percent.

At 0640 GMT the rand had edged up 0.2 percent to 14.2700 per dollar, but will struggle to hold on to the gains as the likelihood of a interest rate hike in the U.S. increases, with another Federal Reserve member hinting at a December liftoff.

Yields on bonds continued to climb, with the benchmark issue due in 2026 adding 1 basis point to 8.605 percent in early trade to a 1-1/2 month high.

The rand has weakened nearly 3 percent since Friday’s stronger-than-expected U.S. jobs data and is down 9 percent for the month, according to Thomson Reuters data.

Together with Brazil’s real and the Turkish lira, the local unit is one of the worst performing developing market currencies in 2015.

“With no positive data releases expected this week we anticipate that South Africa’s currency will remain under pressure in coming days,” analysts at NKC African Economics said in a research note.

Stats SA releases manufacturing output figures at 1100 GMT with mining production data due on Thursday. Economists polled by Reuters expect contraction in both sectors..

Slowing economic activity and the weaker currency risk pushing up inflation, possibly forcing South Africa’s Reserve Bank to lift lending rates for the first time since July when its policy committee convenes next week.