The rand weakened on Monday as Brazilian economic woes, Mozambican tension and rising US Treasury yields continued to fuel risk off sentiment in global currency markets.
Mounting investor unease about emerging markets (EM) stems partly from rising concern about the Brazilian government’s spending plans and hefty debt burden, said TreasuryONE currency strategist Andre Cilliers.
Last week, the Brazilian real had its worst plunge in two years, hitting a record low, Reuters reported.
Cilliers said Brazil’s fiscal uncertainty “sparked broader EM contagion” in other developing economies. Markets are increasingly risk-averse to EM currencies, seen as exposed to systemic fiscal risk, he said.
SA, with its heavy debt burden and reliance on commodity exports, is particularly vulnerable to the intensifying EM sell-off.
Mozambique’s civil unrest has added fuel to the fire as protests and trade disruption continue to erode confidence in the stability of Southern Africa as a whole.
Earlier this month, the Road Accident Fund estimated that suspended operations at the Port of Maputo cost the SA economy R10m a day with far-reaching consequences for neighbouring Sadc members.
JSE-listed Gemfields warned that the situation hampered its business last week as illegal ruby miners tried to invade the group’s Montepuez operation in Mozambique, forcing the site’s temporarily closure and wrecking infrastructure.
Surging US Treasury yields put more pressure on the rand, with the 10-year note hitting a seven-month high last week.
At 5.15pm, the rand was 0.47% weaker at R18.77/$. It was relatively stable at R19.49/€ and 0.31% weaker at R23.54/£.
The JSE all share closed 0.93% weaker, with all major sectors tracking lower. Food producers gave up 0.95%, financials 0.53%, banks 0.55% and industrials 1.05%.
Miners led intraday losses with the precious metals and mining index down 2.03%. Harmony Gold shed 2.57%, Impala Platinum 3.36%, Sibanye-Stillwater 3.37% and Anglo American Platinum 2.71%.
Gold weakened 0.66% to $2,604/oz. Platinum shed 0.98% and palladium 0.95%.Oil was up 1.05% at $74.17 a barrel.
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