JOHANNESBURG — South Africa’s rand fell to a five-week low against the dollar yesterday as domestic woes hurt the currency’s carry yield attraction and stocks ended a six-session winning streak.
At 1645 GMT, the rand traded at 14.5100 per dollar, 0.35 percent weaker than its previous close, with the currency trading at its weakest levels since December 12.
The currency has weakened 3.5 percent since the beginning of the year, as the country grapples with nationwide power cuts that have dented economic output and sapped investor confidence.
The International Monetary Fund cut its growth forecasts for South Africa in 2020 and 2021 yesterday, citing structural constraints and deteriorating public finances.
“The rand is reflecting the severe weakness of the deteriorated state capacity,” said Annabel Bishop, chief economist at Investec, adding the rand weakness was likely also factoring in the possibility of a Moody’s downgrade in March.
“There is a rising risk of further rand weakness,” said.
Africa’s most industrialised economy is ranked sub-investment grade by S&P and Fitch, two of the three main ratings firms, and narrowly dodged a downgrade to junk by Moody’s last year when the firm opted to only lower its outlook to negative.
The ruling African National Congress was due to wrap up four days of meetings yesterday, with the flagging economy and struggling state-owned enterprises taking centre stage.
On the bourse, stocks took a breather, ending a six-session winning streak on thin volumes. The Johannesburg All-share index dipped 0.26 percent to 58,850 points, while the Top-40 index fell 0.18 percent to 52,638 points.
“The value of trade is quite low because of a public holiday in the U.S. today,” Cratos Capital equities trader Greg Davies said. “. . . there’s nothing really driving the market in any particular direction.”
Leading the decliners was heavyweight Richemont, down 3.26 percent.
Telecoms firm Telkom also took a breather yesterday, weakening 5.46 percent after gaining last week when it announced its intention to cut 3 000 jobs.
Gold stocks bucked the downward trend, with the index jumping 3.22 percent on heightened safe-haven interest.
Sibanye-Stillwater rose 4.85 percent, while Gold Fields gained 4 percent.
In fixed income, the yield on the benchmark 2026 instrument was down 3 basis points at 8.150 percent. — Reuters