South African rand rallies against weaker dollar; stocks slip

JOHANNESBURG: The South African rand rallied against a weaker dollar on Wednesday as top trading partner China pledged more fiscal spending to support its own slowing economy.

But local stocks slipped as bourse heavyweight Naspers  fell.

At 1610 GMT, the rand traded at 13.8350 versus the dollar, 0.9 percent firmer than its previous close and mirroring gains seen in other emerging market currencies.

The South African currency has taken its cue from global drivers for much of this month, first from expectations that the pace of U.S. monetary tightening will slow this year and more recently from concerns over global growth.

The signal from Chinese finance ministry officials on Wednesday that the world's second-largest economy will increase stimulus measures this year helped ease concerns about demand for South Africa's commodity-heavy exports.

Data showing South Africa's consumer inflation fell significantly in December, to 4.5 percent from 5.2 percent in the previous month, barely moved the rand.

The inflation reading was in line with the forecasts of economists polled by Reuters. It added to evidence that the central bank is unlikely to raise interest rates at its next monetary policy meeting in March.

"We expect that inflation will remain within target this year, and that attention will soon turn back to rate cuts," Capital Economics said in a research note.

South African government bonds edged higher on Wednesday, as the yield on the benchmark 2026 instrument fell 3 basis points to 8.82 percent.

Stocks closed slightly lower, with the Johannesburg Stock Exchange's All-share index down 0.3 percent to 53,915 points and the Top-40 index down 0.4 percent to 47,742 points.

Internet and entertainment group Naspers was the biggest faller on the blue-chip index, falling 3.2 percent to 3,050 rand.

Trader Greg Davies of Cratos Capital said Naspers was likely dragged down by bad news for Chinese tech giant Tencent , in which it holds a more than 30 percent stake.

Tencent was singled out by China's cyber watchdog for spreading "vulgar information" via one of its apps. The regulator ordered the platform to make changes, as it deleted thousands of other mobile apps.