04 May

South Africa’s rand weakens as U.S. Fed leaves door open for June rate hike

JOHANNESBURG May 4 (Reuters) – South Africa’s rand weakened against the dollar in early trade on Thursday as the greenback rallied on the back of the hawkish U.S. Federal Reserve statement, pushing emerging market currencies lower.

* At 0707 GMT, the rand traded at 13.5250 per dollar, 0.63 percent weaker from its New York close on Wednesday.

* The Fed kept interest rates unchanged on Wednesday while emphasising the strength of the labour market – a sign it was still on track for two more rate rises this year.

* With the Fed keeping rates unchanged, the rand needed fresh catalysts to strengthen it, analysts said.

* “It really has been a really slow week as the rand treads water waiting. It needs something to jump start it back into life,” said Standard Bank trader Warrick Butler in a note.

* The rand also continued to lose ground against many of its trading partners as investors moved their money offshore in search for higher yields and political stability.

* “(The rand) looks set to weaken further today even as Finance Minister Malusi Gigaba emphasized his predecessor’s policies yesterday. This shows that markets are looking for action rather than lip service as far as local economic policy is concerned,” said Rand Bank Merchant economist Isaah Mhlanga.

* Gigaba said on Wednesday South Africa can regain its investment-grade rating without compromising on promises to transform the economy for the benefit of its black majority.

* The yield for the benchmark government bond due in 2026 rose 4.5 basis points to 8.715 percent.

* The All-share index inched up 0.03 percent to 53,602 points, while the Blue-Chip Top-40 index rose 0.15 percent to 46,988 at 0706 GMT. (Reporting by Nqobile Dludla; Editing by Toby Chopra)




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