South Africa’s rand touched a 3-1/2 week low against the dollar on Friday largely after upbeat US data increased the likelihood of a December rate hike, while firms with large operations outside South Africa led stocks higher.
By 02h20 on Saturday the rand was trading 1.78% down at 13.6412, reversing earlier gains.
Better-than-expected US manufacturing PMI data for October rose to its highest since March, reflecting a recovering economy.
Concerns over the health of the global economy have recently pushed back expectations of a Federal Reserve rate hike into 2016. But upbeat data from the world’s biggest economy have increased the likelihood of a December rise, a move which could weaken the rand further as liquidity tightens.
On the local front, student protests partly dampened investor sentiment as the government scrambles to find additional funds for higher education in an economy where growth is expected to be at 1.5% this year.
President Jacob Zuma on Friday caved in to student demands and ruled out university fee increases next year after a week of angry protests across the country.
“The student protests doesn’t reflect well to offshore investors and the fact that the government is already under pressure from a fiscal perspective and the situation adds to pressure going forward,” said Ricardo Da Camara, market analyst at ETM Analytics.
On the debt market, government bonds were mostly weak, with the yield for debt due in 2026 adding 0.5 basis points to 8.390%.
On the bourse, conglomerate Bidvest and luxury goods group Richemont, both firms have substantial revenue from outside South Africa, helped buoy the market.
“We saw broad-based gains in the market thanks to the hope of further European stimulus and the drop in the rand,” said Ferdi Heyneke, a portfolio manager at Afrifocus Securities.
The European Central Bank is studying new stimulus measures that could be unveiled as soon as December, its president Mario Draghi said on Thursday.
Shares in luxury goods group Richemont were up 2.59% at R116.84.
China’s decision to cut interest rates for the fourth time this year in a bid to lift its sagging economy, also helped lift sentiment, said Heyneke.
Bidvest, which has a large food service business in China, rose 2.5% to R354.
The blue-chip Top 40 index rose 2.06% to 48,799 points while the All-share index climbed 1.88% to 54,298 points.