Rand plunges to 6-month low as EM selloff worsens

The rand tumbled to a new six-month low on Monday as concerns over the economy following weekend power outages worsened the effects of a global selloff of emerging market currencies.

Stocks were also down, led by banks and financials.

At 15:50 GMT the rand was 2.08% weaker at 13.71 per dollar, its weakest level since December 13, with most of the losses coming as trade began in New York.

The rand is down nearly 9% in June against a resurgent dollar, with disappointing economic data cooling enthusiasm under new President Cyril Ramaphosa.

Africa’s most industrialised economy suffered its worst quarterly GDP contraction in nine years in the first quarter, and last week embattled power utility Eskom began the first country-wide controlled power outages since 2015.

“The trade war between China and the US is keeping EMs on the defensive. The growth picture in SA isn’t helping and Eskom is making things worse,” said Halen Bothma of ETM Analytics.

The United States on Friday slapped tariffs on $50 billion worth of Chinese goods, the latest salvo in a widening trade dispute between the world’s biggest economies that has battered emerging markets currencies.

The rand breached the 200-week moving average on Friday with a close above 13.19 to the dollar, while momentum indicators suggest further selling with the 14/$ a target for investors looking to short the currency.

“The rand has moved weaker swiftly, catching some consensus forecasts off-guard so it’s difficult to pinpoint a reversal. But the 14 rand mark looks some way off,” said Bothma.

A Reuters poll earlier in June found the rand is expected to recover to 12.50 per dollar in 12 months, with falling inflation and attractive bond rates expected to keep bulls interested.

In fixed income, the yield on the benchmark government bond due in 2026 was down one basis point to 9.005 percent.

Stocks also ended weaker on the day, with the Johannesburg Top-40 index down 0.63% at 51,004 points and the broader All-Share index down 0.73 percent at 57,236 points.

Insurer Liberty Holdings was down 4% to R119. The giant financial firm said on Sunday it had suffered a cyber attack with an external party claiming to have seized data and demanding a ransom payment.

Banks and financials were hurt by the weaker rand, with the banking index down 2.9%.

Standard Bank fell by the most, dropping 3.5% to R190.