Johannesburg - South Africa's rand fell more than 2 percent against the dollar on Thursday, reversing the previous day's strong gains as the greenback recovered broadly, helped by a downturn in appetite for risky assets.
The local bourse ended lower, tracking weaker global markets as a bull-run in commodity shares took a breather, while government bonds also weakened sharply, pushing yields higher, on unbundling of long positions ahead of the weekend.
Debt problems in Dubai also had an effect, hitting financial markets across the board on Thursday, sinking global stocks and boosting the dollar.
The Johannesburg Top-40 index lost 1.74 percent to 24 477.11 points, while the broader all-Share index shed 1.69 percent to 27 025.61 points.
By 17:40 the rand traded 2.11 percent weaker at 7.4925 against the greenback after ending Wednesday's session at 7.3375. It fell to 7.5075 earlier on Thursday, its weakest level in two days.
"We've seen rand weakness from early this morning, partly I think because of the move down (rand strength) that we've seen recently," a Johannesburg currency trader said.
"Also the move we've seen in the last hour is because of the dollar strength against the euro. I think that is the biggest driver at the moment."
The dollar was firmer as renewed risk aversion prompted investors to dump riskier assets, halting broad dollar selling.
On the local bourse, miner Kumba Iron Ore was the biggest loser, sliding 3.84 percent to R255 followed by African Bank which was down 3.70 percent to R28.90 and Old Mutual, which fell 3.31 percent to R14.31.
Platinum miner Lonmin dropped 3.15 percent to R215, while bourse heavyweight Anglo American was down 3.04 percent to R318.99.
"We are tracking the European markets, which in turn tracked the Asian markets this morning," said Wilmar Buys, a trader at FFO Securities.
"I think the theme of the oversold dollar and commodity run might be a bit halted and people are saying we have had a fantastic run; let's just take some profit."
But Harmony Gold and Gold Fields closed up 3.06 percent to R83.99 and 1.45 percent to R111.60, respectively, while peer Anglo Gold closed flat at R333.
"I think the gold price is still up for the day from yesterday's close, so there's not real downward pressure on the gold sector as such, it's just the heavyweights in the commodity sector like the Anglos that are taking a hit," Wilmar said.
Selling pressure also weighed on government bonds, pushing the yield on the 2015 note up 13 basis points to 8.50 percent while that for the 2036 bond jumped 17.5 basis points to 9.035 percent.
"There are a few sell orders in the market, and the guys have got to a point where they are not happy with holding some of the issued stock. The R209 has come under huge pressure today. It's end-of-week liquidation of stale long positions," a Johannesburg bond trader said.
"Then you've got Dubai coming out with debt restructuring and defaults and the market is not looking very positive at the moment."
Dubai said on Wednesday it was asking creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures conglomerate Dubai World, triggering widespread concern about the once-booming Gulf region's financial health.
- Reuters