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S.Africa's rand firms but stocks fall on risk-off mood

08/02/2021 | 12:44pm EDT
A South African Rand is seen in this illustration picture

JOHANNESBURG (Reuters) -South Africa's rand firmed on Monday boosted by commodity prices and weakening of the dollar, however the markets remained directionless in the absence of any major triggers.

At 1600 GMT, the rand traded at 14.4007 against the dollar, up 1.11% than its previous close.

The primary driver for the strength of the local currency was rand-linked commodities such as iron ore, platinum and gold along with a weaker greenback, said Warren Venketas, DailyFX Analyst.

Last week, the rand clocked weekly gains thanks to a dovish tone from the U.S. Federal Reserve meeting.

Riskier currencies such as the rand thrive on U.S. rates staying low because they benefit from the interest rate differential that increases their appeal for so-called carry trade, in which investors borrow in a low-yielding currency to invest in higher-yielding assets.

Shares on the Johannesburg Stock Exchange (JSE) opened stronger, but slipped through the day to close in the red marginally as index heavyweights Naspers and its subsidiary Prosus lost some early gains.

"There was a bit of profit-taking in the afternoon," said Rajay Ambekar, chief executive of Excelsia Capital, adding that a fall in Naspers pulled the indexes further down.

The sentiment was largely "risk-off" on Monday amid the profit-taking as worries over the Delta variant of the coronavirus, and concerns around global inflation kept sentiments in check, he said.

The benchmark all-share index closed down 0.21% to 68,882 points and the blue-chip index of the top 40 companies ended lower by 0.24% to 62,704 points.

Technology investor Naspers ended down close to 1%, while one of Africa's biggest mobile operators MTN Group was up almost 6%.

In fixed income, the yield on the benchmark 2030 government bond was down 5.5 basis points to 8.77%.

(Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee; Editing by Ramakrishnan M and Shailesh Kuber)


ę Reuters 2021
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