The battered rand staged a minor comeback in late trade on Wednesday after earlier falling to a fresh two-year low against a rampant dollar as the market bet that the US Federal Reserve would announce further aggressive interest rate hikes to tame persistently high inflation.
The local currency fell as much as 1% to R17.46/$ before recovering to R17.3411/$ by 6.20pm, but still 0.3% weaker on the day. It was 0.72% softer against the euro at R17.23/€ but little changed against the pound at R19.89/£.
Higher US rates make dollar-based investments more attractive and tend to suck capital from emerging markets, which are regarded as more risky. The rand is generally regarded as a barometer of sentiment towards emerging markets because of its liquidity.
With US economic data, including last week’s better-than-expected monthly nonfarm payrolls report, remaining strong on balance, investors bet that the Fed would proceed with its monetary tightening cycle to bring inflation back to its 2% target.
In the commodity markets, Brent crude fell almost 4%, dipping below $90 a barrel for the first time since early February on lingering fears of that the global economic slowdown will sap demand, even as Russia warned it would stop supplying oil and gas if price caps are imposed on its products.
But lower oil prices are net positive for SA because it’s a net importer of crude. However, other commodity prices showed signs of stability, with platinum recouping 1% to $858.75/oz.
Sasol fell 6.56% to R312, the most since early July, as a result of lower oil prices.
The JSE, meanwhile, closed lower — albeit off the day’s lows — underscoring the uncertainty that has gripped stock markets in recent weeks. The all share shed 1.22% to 66,715.83 points.
The gauge of top resource stocks shed 1.66% after August exports and imports data from China disappointed, highlighting the punishing effect of the stricter lockdown restrictions by authorities there to contain the spread of Covid-19.
“The headwinds facing the Chinese economy are becoming increasingly fierce and recent efforts to shore it up have appeared inadequate,” Craig Erlam, senior market analyst at Oanda, said in a note.
Banks and insurance stocks had a particularly bad session, weighed down by Discovery, which plunged 10% to R110.11 after the company opted to maintain its no-dividend policy for ordinary shareholders — even though its earnings topped pre-pandemic levels.
PSG group plummeted 74.39% to R22.50 after the unbundling of PSG Konsult, Curro, Kaap Agri and Stadio.
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