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Rand, stocks weaker on hawkish Fed chair comments

Stocks fall, led by banking and retail shares.

South Africa’s rand weakened on bets of higher interest rates in the United States and worries triggered by another rating cut to power utility Eskom by S&P Global Ratings.

Stocks also fell, led by profit taking in banking and retail, and bonds softened, with the yield on the benchmark paper due in 2026 up 1 basis points at 8.125%.

The rand was 0.2% weaker at 11.74 per dollar at 14:45 GMT, compared to its overnight New York close of 11.72.

The rand hit a session-low of 11.77 following new Fed chair Chairman Jerome Powell’s upbeat views on the economy, which stoked bets on further interest rate hikes this year and lifted the greenback to near a three-week high.

 “The prospects of the Fed seriously considering four hikes throughout 2018 lifted the US dollar against the CEEMEA currencies with the South African rand the weakest link as the bulls opted to take profits on the best performing EM currency,” analysts at Rabobank said in a note.

Data from China showing the manufacturing sector in February cooled to the weakest in more than 1-1/2 years also weighed on emerging market currencies.

S&P Global Ratings downgraded state-run power utility Eskom’s debt to CCC+ from B- on Wednesday, citing liquidity concerns, putting pressure on the firms bonds and rekindling fears on its effects on the sovereign rating.

The January trade balance, which swung to a larger-than-expected deficit for the first time in a year, had a muted impact on the currency, with analysts saying the surge in imports was a sign of an economic rebound.

South Africa’s benchmark Top-40 stock index fell 1.25% to 51,383 points while the All-Share index lowered 1.19 percent to 58,325 points.

General retailers fell 2.45 and banks dropped 2.01%, with profit taking from recent highs in the wake of Cyril Ramaphosa’s election as president after Jacob Zuma’s resignation.

“There might be guys selling out some holdings like financials and retailers that have done really well of late,” said portfolio manager at Nedbank Private Wealth Kyle Burgess

Nedbank fell 3.62% to R287.56, Woolworths dropped 3.24% to R65.35 and Massmart weakened 2.50% to R162.98. 

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