The rand steadied against the dollar on Friday as developed market currencies came back in favour, ending a recent rally that has lifted the unit to 3-week high.
Stocks fell for a fourth straight session to a three-week low, as Pioneer Food Group weighed and investors stayed away from risky assets.
At 23:55 on Sunday the rand was trading 13.1166 per dollar, unchanged from Friday’s close in New York.
The currency hit a 3-week high of 13.1175 to the dollar on Thursday as yield-hungry investors ignored the political fallout and two credit downgrades to “junk” that followed President Jacob Zuma’s sudden firing of his finance minister in late March.
The rand faced selling pressure as the dollar was back in favour on the back of subdued risk appetite with investors cautious ahead of French elections this weekend and possible announcements about tax cuts in the United States.
“The thing we need to watch for over the weekend and on Monday is the euro in terms of the French election and its results. We might see some volatility,” Treasury One currency dealer Andre Botha said.
On the bourse, the benchmark Top-40 index closed 0.51% down at 45,500 points, while the broader All-share index lost 0.58% to 52,194 points, a level it hit on March 31 when Zuma removed then finance minister Pravin Gordhan in a controversial cabinet reshuffle.
“There are concerns about what’s happening on the political side of things. You’re going to have a situation where certain funds’ mandate, particularly offshore investors, are not allowed to hold junk assets so they have to realign their portfolios accordingly,” said Independent Securities trader Ryan Woods.
Investors sold off Pioneer Food Group shares after the seller of Ceres juice and Sasko bread said a large potential deal it was exploring had fallen apart because of ratings downgrades of the country’s sovereign debt.
Shares in Pioneer fell more than 7% after the announcement, booking its biggest daily loss since the cabinet reshuffle, and closed 4.38% down at R169.
“Part of the pricing had been put in place already, the market had pre-empted that some sort of deal was going to take place and now they’re adjusting their positions because that is now off the table,” said Woods.
In fixed income, the yield for the benchmark government bond due in 2026 dipped 2.5 basis points to 8.645%.