Rand edges weaker, stocks down

South Africa’s rand eased on Monday as a strong dollar and US Treasury yields holding recent gains put pressure on emerging market currencies, while stocks also edged lower.

At 1550 GMT, the rand was 0.53% weaker at R13.40 per dollar, after closing at R13.33 in New York on Friday.

The rand has had a stellar start to 2019, gaining nearly 7% against the greenback, aided mainly by a global push for emerging market assets that was accelerated by last week’s dovish message from the Federal Reserve.

With a dearth of top-tier data this week and most of Asian markets closed for the Lunar New Year this week, the rand is expected to trade within recent ranges between R13.40 and R13.20.

South African focused investors are waiting for President Cyril Ramaphosa’s state of the nation address on Thursday, where he is expected to give an update on plans to grow the economy and deal with cash-strapped state companies.

“Given that it is an election year, he would be constrained to introduce new sweeping measures without knowing if he will have the requisite power to carry them out after the elections,” RMB analyst Mpho Tsebe said in a note.

The speech is likely to focus on job creation and highlight the government’s key achievements over the past year,” she added.

Government bonds also weakened, with the yield on the benchmark 10-year bond up 2.5 basis points at 8.64%.

Stocks slipped to their lowest since mid-January, with the Johannesburg Stock Exchange’s Top 40 index down just over 1% at 47,183 points. The broader all-share index was also down 1% at 53,391 points.

Firms exposed to South African consumers were hit the hardest, with retailers like Mr Price, Woolworths and Spar Group and lenders including Standard Bank and Absa weighing on the blue-chip index.

Meanwhile, Clover Industries, which processes products like olive oil and yoghurt, closed up 15% after announcing a R4.8 billion ($358.81 million) buyout offer from a consortium.

($1 = R13.37)