Rand falls on subdued risk appetite

The South African rand fell on Thursday as fading hopes for a US-China trade deal and an unsatisfactory end to the US-North Korea summit subdued demand for emerging market currencies.

Stocks ended slightly lower, with Massmart among the biggest decliners after the retailer reported annual earnings down by a third and gave downbeat outlook.

At 1520 GMT the rand was 0.77% weaker at R14.04 against the US dollar.

“Reduced optimism over US-China trade talks, an abrupt end to a second summit between the United States and North Korea, coupled with Brexit uncertainty among many other geopolitical risks, are leaving investors on edge,” FXTM research analyst Lukman Otunuga said in a note.

US Trade Representative Robert Lighthizer’s comments overnight that the issues between United States and China are “too serious” to be resolved prodded investors into scaling back risk as hopes of a swift resolution to the bruising US-China trade dispute waned.

Riskier assets also took a hit after an early end to a US-North Korea aimed at denuclearising the Korean peninsula, with US President Donald Trump walking away as the respective leaders failed to reach a deal on winding back sanctions.

Domestic events also weighed on sentiment, with power utility Eskom warning that it could resume rotational power cuts because of supply constraints.

On the data front, trade figures showed that South Africa’s trade balance swung to a deficit of R13.08 billion ($931.5 million) in January, from a revised R16.70 billion surplus in December.

In fixed income, the yield on the benchmark government paper due in 2026 closed 4 basis points higher at 8.7%.

On the stock market, the JSE Top 40 index was off 0.58% at 49,667 and the broader All-share index fell 0.58% to 56,002.

Wal-Mart’s Massmart featured on the loser board, falling 6.4% to R87.11 after posting a 32% drop in annual profit.