South Africa's rand falls amid global trade disputes; stocks down

02 Jul, 2018

JOHANNESBURG: South Africa's rand weakened on Monday after the dollar rose as investors ramped up bets that escalating trade tensions between the US and its trade partners will hurt the world's biggest economy the least for now.

The dollar received another boost from better-than-expected US manufacturing data.

At 1521 GMT, the rand traded at 13.9100 per dollar, 1.31 percent weaker than its close on Friday.

The currency has weakened 12 percent versus the greenback year to date, hurt by a combination of trade jitters, prospects of higher US interest rates and concerns over the health of the domestic economy.

"The rand is expected to pull back in the interim, but remain within a weak range for most of this year - our base case is now for the rand to trend between R13.00 to R14.00/$ over the next six months," Nedbank analysts Reezwana Sumad and Walter De Wet said in a report.

"One aspect that would warrant a blow-out above the R14.00 level is a continuation or deterioration in geopolitical tensions which would maintain a strong dollar, as the dollar behaves as a safe-haven asset during times of conflict."

Global trade tensions are growing with the United States and China set to impose new tariffs on each other's imports this week and each side threatening more unless the other backs down.

On the local front, a closely watched survey of South African manufacturers showed a further decline in business activity in June, pointing to lingering weakness in Africa's most industrialised economy.

In fixed income, the yield for the benchmark paper due in 2026 rose 6 basis points to 8.895 percent.

South African stocks ended weaker on the day, led by resource shares as commodity prices fell.

The Top-40 index down 1.04 percent to 50,979 points and the broader All-Share index shed 0.78 percent to 57,159 points.

Mining heavyweights BHP Billiton and Glencore were down 2.62 percent and 2.91 percent, respectively. Lonmin lost 2.45 percent to 7.56 rand.

Copyright Reuters, 2018

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