Rand loses more ground
The rand falls in early trade after Federal Reserve chair Janet Yellen said she was “looking forward” to the first US interest rate increase in nearly a decade.
|||Johannesburg - South Africa's rand fell in early trade on Thursday as the dollar gained after Federal Reserve chair Janet Yellen said she was “looking forward” to the first US interest rate increase in nearly a decade.
Stocks opened lower, with telecoms company MTN Group in the spotlight. Nigerian authorities reduced by more than a third, to $3.4 billion, a fine imposed on MTN for failing to cut off unregistered users.
MTN was up nearly 1 percent at R147.90, outpacing a 0.4 decline to 45,777 in the JSE Top-40 index.
By 0714 GMT, the rand was trading at 14.3700, down 0.13 percent from Wednesday's close. The rand fell to an all-time low of 14.4950 to the dollar on Tuesday.
A US rate increased is widely expected hike when the Fed meets later this month. When she spoke at the Economic Club of Washington on Wednesday, Yellen did not say whether an increase would be warranted at that meeting, but she did say keeping rates at zero for too long could threaten financial stability.
Yellen is scheduled to speak again today and traders expect the rand to remain under pressure.
“Given that she will most likely maintain her more hawkish rhetoric, we expect the rand to remain vulnerable to intensified Fed rate hike expectations,” Barclays Africa currency strategist Mike Keenan said.
Her comments sent the dollar index, which measures the greenback against a basket of six major currencies, to its highest level since April 2003. The rand remained resilient, on the strength of loan agreements between China and South Africa, but then gave up some gains in early trade.
The 26 loan agreements signed on Wednesday are worth 94 billion rand ($6.5 billion), including $500 million for South Africa's cash-strapped power utility.
South Africa suffers from a chronic electricity shortage that is increasing costs for industry and discouraging investment. Part of its response is to build new nuclear plants, which experts say may cost as much as $100 billion.
On the fixed-income market, government bonds were mostly firmer, with the yield for debt due in 2026 shedding 1.5 basis points at 8.600 percent.
REUTERS