South Africa’s rand weakened on Friday in line with emerging market currencies as indications the United States central bank would stay on a policy tightening path drained the demand for risk that followed U.S election results.
Stocks fell largely due to subdued risk demand globally and weak consumer demand locally.
At 1512 GMT the rand had slipped 1.06% to R14.2850 per dollar, having hit a session-low of R14.3475 as investors digested the Federal Reserve’s Thursday statement and bought dollars cheap, booking profits from earlier in the week.
“The rand along with its emerging market peers struggled today and gave up gains for the week as momentum is favour of the dollar after the Fed meeting,” said ETM economist Halen Bothma.
“Fresh tail wind supported the dollar after the hawkish Fed affirmed that it would be continuing with policy stabilisation.”
The Federal Reserve held interest rates steady but struck an expectedly hawkish tone that fed into some dollar gains and put emerging market currencies under pressure.
The rand had rallied to R13.8700 on Wednesday following the U.S midterm elections, breaking through the R14.00 long term resistance level for the first time in two months, lifted by a return of global risk appetite.
Bonds were also weaker with the yield on the benchmark paper due in 2026 adding 7.5 basis points to 9.22% ahead of an auction where Treasury will place R10.655 billion in short-term bills.
On the bourse the Top-40 index fell 1.56% to 46,897 points, while the broader the All-share index slipped 1.42% to 53,295 points.
“(It’s) a global selloff today and no one seems to have been exempt but we have come off earlier lows,” said Ryan Woods, trader at Independent Securities.
Bourse heavyweight Naspers fell 1.83% to R2,745. Shares in Technology giant Tencent Holdings Ltd , in which Naspers has a 31% stake, also fell. Tencent is reportedly cutting the marketing budget for its key gaming division.
Shares in sugar producer Tongaat dove as much as 12% and closed 6 percent weaker at R61.30 after reporting that it had swung into a half-year loss and cited unfavourable market conditions in its South African and Mozambique sugar operations.
Gold Fields shares were 2.56% lower after the company reported a 3% drop in third-quarter production, dragged down by a decline in output from its last South African asset, South Deep.