Rand hit by China slowdown fears, stocks lower

Johannesburg - The rand breached through key psychological support levels on Wednesday, stretching losses to over 3% in the last three days as a dollar rally and bleak Chinese manufacturing data weighed.

Stocks opened lower on South Africa's blue-chip Top-40 index, which was down 0.2% by 09:02.

Government bonds were weaker with yields rising across the curve. The benchmark 2026 paper added 2 basis points to 8.43% in early trade.

By 08:30 the rand had slipped 0.5% to R13.7500/$, sinking to its weakest in two weeks as global factors dominated ahead of a domestic central bank interest rate decision later in the session.

The greenback rose close a three-week high, lifted by the increasing likelihood the US Federal Reserve will raise interest rates by year-end after keeping them unchanged last week, putting emerging market currencies under pressure.

Economists polled by Reuters assigned a 60% probability of a US rate liftoff happening in December.

"All positive sentiment borne out of the Feds decision to stay pat on rates for now, have in just two days been completely obliterated," said Inshaan Omar, a trader at Standard Bank.

The rand was also hit by data showing Chinese factory activity fell to a six-and-a-half-year low, which spurred a sell-off of commodity currencies as concerns of a slowdown in the world's number two economy intensified.

The rand failed to hold on to a break through technical resistance around 13.50 that saw it strengthen as far as 13.1700 in the previous week. Overnight, the unit drifted close to 13.80 before pulling back.

"The rand remained under pressure overnight with traders shifting their gaze back to the psychological R14/$ level," analysts at NKC African Economics said in a note.

South Africa's Reserve Bank (SARB) will announce its interest rate decision at 15:00, with expectations the bank will keep benchmark rates unchanged after hiking by 25 basis points to 6% in July.