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Rand bows to dollar effect, stocks lifted by mining shares

Rand crumbles in the face of dollar bounce.

The rand retreated on Tuesday as a resurgent dollar pushed back and wiped away early demand for risk currencies while turning up technical pressure on the local unit.

The bourse gained ground lifted higher by mining companies.

At 1500 GMT the rand had weakened 0.35% to 13.03 per dollar, sinking to its softest level in nearly a week despite early demand that lifted the unit to session-high of 12.87 before the greenback’s rebound kicked-in.

The dollar index extended gains slightly on the day after recording its largest gain this month on Monday, with receding worries about North Korea and Hurricane Irma soothing sentiment.

The latest twist in the political spat between the central bank and Public Protector had yet to affect trade in the rand, traders said, with technical considerations the main focus.

“Demand from local corporates and offshore investors was fairly robust this morning even after the Sarb’s comments on the Protector’s report. The rand’s move was about the dollar’s comeback versus EM currencies and commodities,” senior trader at Standard Bank Oliver Alwar said.

The Reserve Bank on Tuesday accused the anti-graft watchdog of glaring omissions and procedural unfairness in her report that recommended the bank’s mandate be changed to focus on growth rather than currency and price stability.

“Technically the rand’s also had a downside failure after last Friday’s indecisive close, resulting in the reversal we’ve seen over the last few days,” Alwar added

The rand managed gains of around 5% in the last month, breaking through crucial technical levels, but has lost momentum in recent sessions and is expected to see further short-selling.

On the bourse, the benchmark Top 40 Index was up 0.7% at 49 970.85 points, while the broader All Share Index advanced 0.6% to 56 366.16 points.

Diversified mining company BHP, which has petroleum and iron ore assets in its portfolio, was the best performer among the blue chips, advancing 2.6% to R248.65.

Crude prices gained after the Organisation of the Petroleum Exporting Countries said its output fell in August, an indication that the production-cutting pact was helping to reduce a supply glut.

Resource firms were further buoyed by a rebound in iron ore futures on steady demand from China.

Shares in Anglo American, which also has iron ore assets, was up 1.2% at R239.85.

In fixed income, the yield for the benchmark government due in 2026 rose 0.5 basis points to 8.46%. 

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