The rand weakened on Thursday, pausing a recent rally to one-month highs as disappointing Chinese consumption data dampened investor hopes of a quick economic recovery from the COVID-19 pandemic.
At 1500 GMT, the rand was 0.3% weaker at R16.65 per dollar, compared with the previous session’s best of R16.50.
Wednesday’s rally, across most emerging market assets, was spurred by progress in finding a COVID-19 vaccine by US firm Moderna, whose experimental shot showed it was safe and provoked immune responses in all 45 healthy volunteers.
But China’s unexpected drop in retail sales – for a fifth straight month – saw some investors rush back to safe-haven assets.
“Investors seemed to put more weight on the consumption data and have pulled out of riskier assets,” said Hussein Sayed, chief markets strategist at FXTM.
The rand has been at the mercy of global sentiment for the past few weeks, pulling away from the key R17.00 technical level despite South Africa’s creaking economy and strained finances.
“The global environment is increasingly supportive of the rand as risk-on (investment) is fuelled by positive economic surprises in China and developed markets,” said Kim Silberman, a currency economist at RMB, in a note.
“However, due to domestic fiscal risks, we expect USD/ZAR to trade above fair value, around a mid-point of R17.00 over the next few months, rallying to below R16.50 on positive global surprises and selling off towards R17.50 in response to global uncertainty.”
On Thursday, South Africa’s government committed to secure funds for the overhaul of struggling state-owned South African Airways (SAA), which requires at least R10 billion ($600 million).
SAA is among a group of state firms in need of additional state bailouts, with the pandemic adding to existing problems.
Stocks were mostly unchanged after deteriorating US-China relations dampened global risk appetite.
The FTSE/JSE All Share Index fell 0.25% to 55,808 points, while the FTSE/JSE Top 40 Companies Index ended down 0.47% at 51,363 points.
Retailer TFG Limited fell 4.9% to R69.27 rand after it priced its rights issue at 41% discount.
Bonds were firmer, with the yield on the benchmark 2030 government issue down 2.5 basis points to 9.35%.