The robust rand will rule South Africa's stock market next week, in the absence of major local corporate and economic news, with investors keen to see if it will strengthen through the 6/dollar level, traders said.
If it does, heavyweight resource and rand-hedge shares such as Anglo American Plc and its platinum subsidiary Anglo American Platinum, are likely to be among the big losers on concerns over their future earnings.
The Johannesburg bourse is home to some of the world's biggest mining companies, such as world number two gold producer AngloGold.
Together with other exporting and dual-listed firms, such as energy company Sasol and luxury goods group Richemont, they account for at least three quarters of daily trade and tend to suffer when the rand strengthens as they price their products in dollars.
"It's going to be a currency-driven week," said one senior trader. "The big question is whether the rand breaks below six to the dollar."
The rand retreated from near five-year highs against the dollar on Friday, but traders said it had not given up attempts to break the psychological 6/dollar in the near term. At 1027 GMT, it was trading at 6.09/dlr compared to 6.05 at the close on Thursday.
The gold price could provide some respite for the market if it continues to hold above $400 an ounce. That would lend some support to gold mining shares whose earnings have been under severe pressure from the strong rand.
A report released by the South African Chamber of Mines in June said a majority of the industry was loss-making due to further declines in the domestic gold price and rising costs.
"The strong rand means further margin pressure, pricing pressure; it has serious implications for earnings," said another trader.
Spot gold was trading at $406.50/407.25 an ounce compared to $407.25/408.00 in the US market on Thursday. Analysts expect it to rise to $412 if it holds above the crucial support level of $398 for the next few days.
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