Rand rebounds as Turkey-led rout eases, stocks falter

South Africa‘s rand gained more than 2% on Tuesday, bouncing off a two-year low struck a day before, when investors dumped emerging market assets because of fears over the Turkish economy.

At 15:06 GMT, the rand traded at 14.2000 per dollar, around 1.5% stronger on the day and nearly 10% stronger than its weakest on Monday. The unit had early firmed more than 2% to a session high of 14.0200/dollar.

Government bonds also firmed, as the yield on the benchmark government bond maturing in 2026 fell 10.5 basis points to 8.945%.

The rand, one of the most traded emerging market currencies worldwide, is highly susceptible to swings in sentiment on global markets.

On Monday it was rattled by a plummeting Turkish lira , which has been dragged lower by worries over President Tayyip Erdogan’s calls for lower interest rates and worsening ties with the United States.

“The rand remains at risk amongst the EM currencies, depreciating as risk-aversion rises, and strengthening in neutral to risk-on periods. The latter is more likely to occur at year end,” Investec chief economist Annabel Bishop said in a note.

“The recent tumult has meant that R14.00/USD has become the new key resistance level for the rand to break on the lower side, and the currency is likely to attempt this quarter.”

Despite the sharp slide in the rand on Monday, a deputy governor at the South African Reserve Bank told Reuters the regulator was “nowhere near” intervening to support the currency.

The lira gained on Tuesday after the country’s central bank pledged to provide liquidity, helping lift the mood on Asian markets.

The rand is down 13% against the US currency this year.

South Africa has a narrower current account deficit and smaller stock of short-term external debt than Turkey, and the economy is expected to grow modestly this year after a torrid first quarter.

On the bourse, shares ended weaker as stocks that benefit from the rand strength struggled to lift the market.

The blue-chip JSE Top-40 index was off 0.52% to 51 551 points while the broader All-share index gave up 0.48% at 57 608 points.

Market heavyweight Naspers tumbled 2.06% following technology firm Tencent’s 3.43% slump in Hong Kong trade.

Amongst the biggest decliners, Gold Fields fell 13.82% to R41.84 after it reported plans to cut costs and 1 100 jobs at its struggling South Deep mine.