Rand firmer on China high, stocks falter

The rand extended earlier gains to a one-week high on Wednesday on renewed interest from foreign investors, especially those forced to cover bearish bets following Tuesday’s surprise rally on news of massive investment by China.

At 14:15 GMT the rand was 0.7% firmer at 13.19 per dollar, slightly off a session-best 13.14, its firmest against the greenback since July 17, aided by overall risk-on sentiment as well as improving sentiment locally.

Uncertainty over the brewing trade war between Washington and Beijing has sapped the dollar, providing respite to most emerging market assets.

Chinese President Xi Jinping, speaking in Johannesburg, said a global trade war should be rejected as it would leave no winner.

On Tuesday Xi and South Africa’s President Cyril Ramaphosa announced that China would invest $14.7 billion in the local economy, lifting the rand.

The rand had tripped to a 5-day low last Thursday following a central bank warning that risks to inflation were rising and the outlook for economic growth had worsened.

The rand has however gained more than 3% since Friday, triggering a number of stop losses as it hurdled technical milestones at 13.50 and 13.30, which have been used by short-sellers to avoid excessive losses when selling dollars.

The rand has lured offshore investors a tidy carry-trade due to low inflation and relatively high lending rates

“Overall the rand is still in this slightly wide 13.15-13.60 range. As long as the dollar remains lethargic then this will continue to entice yield-chasers,” said chief trader at Standard Bank Warrick Butler in a note.

Bonds were also in vogue, with yield on the benchmark down 10 basis points to 8.625%, a two-week low.

“It’s been the fast-money players, rather than locals looking to buy at these levels,” said fixed income analyst at Rand Merchant Bank Michelle Wohlberg.

On the bourse, shares lost to risk aversion amid growing trade war tensions between the United States and China.

The Johannesburg All-share index weakened 1.17% to 56,387 points, while the Top-40 index fell 1.31% to 50,321 points.

“The trade war rhetoric is taking centre stage. The market is concerned and pulling back although it’s not a full blown war yet,” said Cratos Capital equities trader Greg Davies.

“China has blocked Facebook from opening offices there, which shows that US companies are getting blocked from expanding and things are heating up.”

Among the biggest decliners, diverse miner Sibanye-Stillwater shed 2.34% to R7.08, followed by Impala Platinum, which lost 1.02% to R18.40.