South Africa's rand retreats, stocks slip as political uncertainty weighs

JOHANNESBURG: South Africa's rand retreated on Monday, pausing a four session rally as some investors cashed in on recent gains and the dollar regained some ground after being hit by a poor wages report last week. Stocks edged lower as the possibility of a cabinet reshuffle resurfaced ahead of Thursday's State of the Nation Address (SONA) by President Jacob Zuma.

By 1550 GMT the rand had slipped 0.95 percent to 13.3975 per dollar compared to a close at 13.2800 on Friday in New York.

The rand drifted sideways for most of the local session, clinging to technical resistance around 13.2800 before turning weaker as New York markets opened and the dollar showed signs of a comeback from its worst start to a year in more than three decades. "The rand looks a bit overbought at the moment and is due some weakness," said analyst at IG Markets Shaun Murison.

"There was no domestic catalyst in play today but we are expecting some nervousness going into the state of the nation address," Murison said. On the bourse, the Johannesburg All-Share index traded at levels it was four weeks ago, losing steam as investors focus on any hints of a cabinet reshuffle when Zuma delivers his annual address to a joint sitting of the two houses of parliament on Thursday evening. "Markets have been under the control of central banks, now politicians seem to be controlling the market.

We've got the state of the nation address on Thursday, people are quite nervous about a cabinet reshuffle," said Cratos Capital equity trader Greg Davies. "We're kind of waiting and seeing if anything politically happens."

The absence of further rumours had seemingly allowed local markets to recover as investors sought fresh catalysts.

Zuma rattled markets in December 2015 when he fired his respected finance minister in favour of a relatively unknown member of parliament. The benchmark Top-40 index slipped 0.14 percent to 45,354 points while the All-Share index dropped 0.22 percent to 52,151 points.

Astral, which is weighing job cuts, closed 2.8 percent lower to 148.45 rand after the poultry producer flagged a slump in half-year profit.

Bonds were flat on the day, with the yield on the benchmark paper due in 2026 adding 1 basis point to 8.83 percent.