South African rand recovers from hawkish cenbank comments, stocks rise

JOHANNESBURG: South Africa's rand rose more than 1 percent on Friday as short sellers bought back into the currency at cheaper levels after hawkish comments from the central bank caused a sharp decline in the previous session.

On the bourse, stocks closed higher for a fourth straight session, led by rand-hedged stocks which tend to strengthen as the currency weakens.

Having risen more than 1 percent earlier in the session, at 1540 GMT the rand was 0.65 percent firmer at 13.4525 per dollar. On Thursday it tumbled to a 2-week low of 13.6195 overnight after the Reserve Bank held benchmark interest rates and cut its outlook for the local economy.

"The rand appreciated a bit on short covering at the start of Friday's session in the aftermath of US President Donald Trump saying late on Thursday that he was "not thrilled" by Fed rate hikes," said analyst at Continuum Economics Juri Kren.

While the decision was expected, the bank's view that inflation pressures had tilted to the upside and that economic growth would remain tepid soured sentiment, stoking a quick selloff as bearish investors used 13.50 as an exit point.

Friday's trade session however saw the rand open on the frontfoot.

And with Trump's latest comments spurring investors to take profits on the greenback's recent rally, and subsequent short-covering by rand bears seeing value around 13.45, the rand extended its run firmer.

The rand is however expected to struggle to hold on to gains in the upcoming week with US-China trade tensions seen returning to the forefront of investors radars.

Bonds were also firmer, with the benchmark paper due in 2026 down 1 basis point to 8.735 percent.

The blue-chip Top-40 index closed up 1.4 percent at 50,904 points, while the broader All-Share index rose 1.27 percent to 56,990 points.

"Its longest winning streak since mid-May as rand hedges were among the biggest contributors to the benchmark's strength after the currency's 2 percent slump yesterday," said a traders note from Avior Capital Markets.

Bourse heavyweight Naspers, which owns about 30 percent of the Chinese technology firm Tencent, closed up 1.79 percent at 3448.50 rand, while British American Tobacco rose 3.72 percent to 695.36 rand.

Sasol gained 0.77 percent to 502.84 rand after it flagged higher full-year EBITDA.

By contrast, the biggest decliner was retailer Steinhoff's , which fell 9.27 percent to 3.23 rand on profit-taking.

This was after shares soared 26 percent on Thursday when creditors agreed to hold off debt claims for three years.