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South Africa’s rand weakens as trade war sours risk demand

South Africa’s rand weakens as trade war sours risk demand

JOHANNESBURG: South Africa’s rand retreated more than one percent on Wednesday as an escalation in the trade war between the United States and China hit global demand for emerging market currencies.

Stocks also weakened with commodity stocks taking the hardest knock.

At 1010 GMT the rand was down 1.5 percent to 13.5350 per dollar, its weakest since Friday, snapping a six-session winning streak that propelled to its firmest in nearly a month.

U.S. President Donald Trump said overnight Washington would impose further tariffs Chinese goods, dampening hopes for  a descalation in the trade row investors fear will derail a global growth rebound.

Traders, already treading cautiously this week, said they were taking small profits on the rand’s recent rally and positioning for a stronger greenback.

“This toing and froing between China and the U.S. isn’t helping emerging markets. The rand hasn’t taken any local data into account over the last couple of weeks. It’s all about the dollar,” said trader at TreasuryOne Andre Botha.

The rand touched 13.2450 overnight, near a key technical resistance mark, but backtracked soon after with recent buyers now looking to sell beyond the 13.50 level.

Short-term momentum indicators also suggested the currency had strayed into overbought territory, exacerbating the selloff.

Bonds also weakened, with the yield on the benchmark bond due in 2026 rising 6 basis points to 8.73 percent.

On the bourse, The Johannesburg Stock Exchange’s Top-40 index was down 1.6 percent at 50,948 points, while the broader All-Share index had slipped 1.56 percent to 57,119 points.

Commodity stocks were dragged lower by a global fall in precious metals in response to the trade war fears.

Spot gold was down 0.4 percent while platinum fell platinum 0.5 percent. Copper, zinc and lead all slumped between 3 and 4 percent to their lowest levels in about a year.

Locally, the index of mining companies was down 2.1 percent, led lower by Glencore, which was down almost 3.7 percent.

Copyright Reuters, 2018

Source: Brecorder

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