Rand tumbles to five-month low, stocks led down by banking sector

The rand weakened on Friday as surging US Treasury yields and a continued dollar rally sent emerging markets tumbling.

Stocks were dragged lower with banking shares leading the way amid continued risk-off sentiment for emerging markets.

At 1345 GMT, the rand traded 1.65% lower against the dollar at 12.79 per dollar, having reached a session low of 12.82, its weakest level since December 19.

Emerging market currencies across the board were down against the greenback, led by the Turkish lira, as risk off sentiment has caused an exit from emerging markets.

The dollar has risen 5% since mid-February and investors are betting that US interest rates will need to rise further to curb inflation.

“The higher interest rate expectation does not sit well with the rand, in the short term we touch 12.800 and the next level being 13.000 is worrying,” said Cheslyn Francis, derivatives trader at Afrifocus securities.

Turkey’s lira edged towards yet another record low on Friday as investors waited to see whether Ankara’s central bank will take action to shore up the ailing currency with 10-year benchmark bond yields rising to 15%.

Government bonds weakened, with the yield for the benchmark instrument due in 2026 rising 11.5 basis points to 8.625%.

On the bourse, the benchmark Top 40 Index fell 0.74% to 51 292 points while the All Share Index lowered 0.65% to 57 804 points.

The banking sector weakened 1.95% amid dwindling global appetite for emerging markets, with Standard Bank down 2.48% to R197.99 and Nedbank 1.22% lower to R289.48.

“The oil price has moved from say 60 dollars a barrel in the beginning of the year to 80 (dollars) now and the rand has moved from around 11.50 a dollar to 12.50 a dollar and that’s going to put the consumer under a lot of pressure and the banks are reflecting that,” said Cratos Capital equities trader Greg Davies.

Further losses were seen from construction firm Aveng Limited which closed down 1.10% to 0.90 rand after it said it has agreed in principle to merge to create a multinational engineering group with Murray & Roberts.