Rand slips on lower global risk demand

JOHANNESBURG – The rand retreated more than 1 percent yesterday as global risk demand fell off with concerns about the trade row between the US and China lingering, while stocks gained slightly on the day.

At 5pm, the rand bid at R14.4114 to the dollar, 29 cents weaker than at the same time on Tuesday, slightly firmer than the session-low of R14.4975.

The rand briefly traded below the R14 mark on Tuesday before giving back those gains, and has since tumbled alongside other emerging markets as investor optimism over the US-Mexico trade deal faded.

Traders said month-end rebalancing by of portfolios, which often sees fund managers and traders buying dollars to match losses by the local currency, had added to selling pressure.

Washington and Mexico agreed on Monday to overhaul the Nafta trade deal. But the fact that US President Donald Trump’s planned tariffs of another $200 billion on Chinese goods could take effect in late September dashed market optimism.

Local jitters over the government’s land reform policy have also weighed on sentiment toward the rand.

The local currency rallied briefly to R13.9525 earlier after parliament withdrew an expropriation bill passed in 2016 that allowed the state to make compulsory purchases of land.

The thrust of the bill, which sought to make compulsory purchases of land to redress racial disparities in ownership, has been overtaken by a proposal by the ANC to change the constitution to allow the expropriation of land without compensation.

“In view of next year’s elections this contentious topic is not going to have caused volatility in the rand for the last time,” said emerging analyst at Germany-based Commerzbank, Elisabeth Andreae in a note.

On the bourse, the all share index strengthened 0.21 percent to 60 165.51 points and the Top40 index gained 0.27 percent to 54 030.60 points, in line with international markets continuing to benefit from subdued trade tensions.

Steinhoff rose sharply after its board said it would meet over the next two days to discuss asset sales to boost cash flow and pay down debt. Its stock closed 25 percent higher at R2.75.

– REUTERS