JOHANNESBURG: South Africa's rand tumbled to its weakest in nearly three months, bond prices hit a seven-week trough and gold stocks caved as a hawkish speech by the chief of the US Federal Reserve worsened jitters about the local economy's prospects.
As of 1500 GMT, the rand slumped 1.5 percent to 13.5750 per dollar, its weakest level since July 11, as comments by Fed Chair Janet Yellen late on Tuesday emphasised the need to continue with rate hikes.
The speech saw the dollar and US Treasury yields rally hard and emerging market assets across the board hit by outflows.
"Everybody is weak, everybody is taking a beating against the dollar. Higher rates in the US at this stage are really bad for emerging markets," said chief currency dealer at TreasuryOne Wichard Cilliers.
"Yellen was very hawkish, that's why you're seeing the dollar pumping," Cilliers said.
Traders said South Africa's dismal economic outlook and ongoing political turmoil was set to worsen sentiment toward the rand and sharpen the downward trend.
Thousands of South Africans on Wednesday marched against corruption under President Jacob Zuma's rule in protests led by unions which have backed a rival to the president's faction as the next leader of the ruling African National Congress.
Political wrangling between the Treasury and the state pension manager the Public Investment Corporation (PIC) over a possible bailout for national carrier South African Airways was also weighing on demand.
"Whether it's perception or reality doesn't matter, there will be huge political fallout if any move is made to use the pension money of government employees in the wrong way," said portfolio manager at Ashburton Wayne McCurrie.
Bonds also weakened, with yield on the benchmark paper due in 2026 rising by 10.5 basis points to 8.645 percent, its highest since Aug. 11.
On the bourse, gold stocks took a knock as safe-have bullion buying subsided, with Harmony Gold and Sibanye-Stillwater losing out the most. The pair fell 2.18 percent and 2.6 percent respectively.
Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the greenback, in which it is priced.
The Top-40 index inched up 0.4 percent to 49,018 points, while the broader All-Share index was 0.26 percent higher at 55,214 points.
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