Rand weaker for third day; Fitch eyed

The rand headed lower for the third day in a row on Monday, trading near a six-month low as investors awaited a ratings review by Fitch and important local data releases which will shed light on the health of the sputtering economy.

At 1542 GMT, the rand traded at 13.12 per dollar, 0.3% weaker and not far from a year low of 13.28 per dollar struck on Friday.

The rand has been dragged weaker recently by an emerging market selloff in which global investors have dumped riskier assets, as well as unsettling gross domestic product data which showed the South African economy contracted by 2.2% in the first quarter.

Traders will scrutinise Fitch’s review of South Africa’s sovereign rating, which is expected this month, as well as retail sales and mining data published later this week, when adjusting their positioning in rand assets.

Mining was one of the sectors which performed poorly in the first three months of 2018.

The US Federal Reserve is seen raising interest rates this week, a move which typically pressures developing market currencies like the rand.

Nedbank analysts said they were keeping their year-end rand target of 13.10 to the dollar for now since they said the South African currency looked to have overshot.

“We are cognisant not to extrapolate current weakness too far into the future,” they wrote in a note to clients, citing technical indicators including a support level around 13.58 rand per dollar.

Finance Minister Nhlanhla Nene said in comments published on the weekend that the government was concerned by the recent rand plunge and would step up a “defence mechanism,” though he did not say what measures the country could take.

On the bourse, shares were slightly weaker. The All Share Index closed down 0.1% at 58 146 points and the Top 40 Index was also down 0.1% at 51 835 points.

Rand hedge stocks like British American Tobacco, which rose 2% on Monday, bucked the weaker trend.