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South African rand dips on stronger dollar, stocks fall

11/24/2021 | 10:57am EST
Illustration photo of South African rand

JOHANNESBURG (Reuters) -The South African rand fell to a 12-month low on Wednesday as the U.S. dollar strengthened and contagion from under-pressure Turkish lira lingered.

At 1500 GMT, the rand traded at 15.9175 against the dollar, 0.5% weaker than its previous close.

The U.S. dollar continued its upward trend on renewed bets the Federal Reserve will hike rates to tame inflation.

With no major domestic market moving news, analysts are expecting the rand to keep tracking global drivers.

"The contagion spillover effect from Turkey and rampant dollar remain the key drivers," Andre Cilliers, currency strategist at TreasuryONE, wrote in a research note.

The Turkish lira, which slid to 13.45 a dollar for the first time on Tuesday, rose on Wednesday, although the currency was still in record-low territory.

A sharp drop in one emerging market currency can hurt highly liquid peers such as the rand as investors dump assets of a similar risk profile.

The South African government's 2030 bond was up 7 basis points to 9.755%, reflecting weaker bond prices.

Stocks fell, dragged by gold shares tracking a fall in prices of the yellow metal on the stronger dollar. Spot gold fell 0.43% to $1,781.97 per ounce by 1525 GMT, while U.S. gold futures were down 0.21% at $1,780.1

The mining index fell 1.46%, with gold mining companies the main drag. Sibanye Stillwater Ltd, Harmony Gold, DRD Gold, Gold Fields and AngloGold Ashanti all dropped between 1.1% and 1.8%.

"The yellow metal had benefited greatly from a combination of higher inflation and central bank push back but the readjustment in interest rate expectations in the markets has brought it back down to earth with a bang," Craig Erlam, Senior Market Analyst for UK & EMEA regions at OANDA, said.

Food producer and fashion retailer AVI Ltd was the second biggest decliner on the All-share index, falling 6.90% after it revealed it had progressed discussions with Mondelez International LLC regarding the potential acquisition of its Snackworks division.

Overall, the Johannesburg all-share index fell 0.64%, while the Top-40 index closed 0.62% lower.

(Reporting by Alexander Winning, Olivia Kumwenda-Mtambo and Nqobile Dludla; Editing by Krishna Chandra Eluri)

ę Reuters 2021
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