South African rand weaker on subdued risk taking, stocks fall

JOHANNESBURG (Reuters) -The South African rand slipped on Tuesday as rising U.S. Treasury yields and more evidence of slowing growth in China amid a power shortage dented risk appetite, while poor domestic non-farm jobs data also weighed on sentiment.

At 1500 GMT, the rand traded at 15.0950 against the dollar, 0.9% weaker than its previous close.

The government's benchmark 2030 bond also weakened, with the yield rising 4.5 basis points to 9.305%.

Some investors see the rand as a proxy for emerging market risk, which means it can be highly volatile.

"We can expect increased volatility throughout the week with various high-impact economic events in conjunction with lingering risk sensitive events always in the back of our minds: Evergrande, Chinese production constraints (power shortage) and COVID-19," said DailyFX analyst Warren Venketas.

"U.S. debt ceiling stand-off also leaning to a risk-off outlook which should pull investors away from the ZAR."

The U.S. dollar climbed to its highest level in more than 10 months on Tuesday, as a rise in U.S. Treasury yields made the greenback more attractive to investors.

U.S. Treasury yields have surged since the end of last week, after the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and hinted that interest rate hikes may follow.

At home, data showed on Tuesday that South Africa's formal sector employment, excluding agriculture, dropped by 86,000 to 9.566 million people in the second quarter, pointing to a fragile economic recovery.

Shares listed on the Johannesburg Stock Exchange (JSE) dropped in line with global markets which were spooked with growth concerns around China and signs of gradual withdrawal of stimulus across countries, primarily the United States.

Despite the daily jarring market moves, the JSE was still not factoring in the tough times ahead for shares, said David Shapiro, deputy chairman of Sasfin Securities.

"At the moment, the market is very shortsighted, and we're still rejoicing in what we've seen over the last few months, not what we are likely to see in the next six months."

The benchmark all-share index closed down 0.64% at 63,784 points and the blue-chip index of top 40 companies ended down 0.56% at 57,462 points.

Except coal-to-fuel company Sasol Ltd, which posted an increase of over 5% on rising crude oil prices, the market fall was largely broad-based on Tuesday.

(Reporting by Alexander Winning, Olivia Kumwenda-Mtambo and Promit Mukherjee; editing by Jonathan Oatis)