Rand leads markets lower as post-Fed bull-run fades

Johannesburg – The rand slid more than 1.3% on Monday as some of the emerging market euphoria wore off from last week's decision by the US Federal Reserve to leave rates unchanged.

Stocks ended slightly lower, tracking other emerging markets equities, as global growth worries weighed on mining companies.

At 15:17 GMT the rand was changing hands at R13.4920 to the greenback, down 1.33% from Friday's close at R13.3150.

Traders said the local unit could weaken further if SA's own monetary policy makers leave the benchmark repo unchanged at 6% on Wednesday, a move which would whittle the rand's carry trade appeal.

The rand had appreciated to a three week high last Thursday after the Fed left US rates unchanged, offering a reprieve to emerging markets that have been sold off heavily in anticipation of a resumption of policy tightening in the world's top economy.

"I think people were a little bit too optimistic on Thursday, selling off the dollar in such dramatic fashion," Bidvest Bank's chief dealer Ion de Vleeschauwer said.

"The Fed gave us some breathing space, but the market seems to think that this is an opportunity to buy dollars now because the Fed is going to hike eventually."

The deferred US rate hike could lead the South African Reserve Bank into hold off increasing local rates when it concludes its three-day meeting on Wednesday.

A Reuters poll shows 28 of 31 economists expect the repo rate to remain unchanged at 6%, with only two seeing a 25 basis point increment while one predicted a 50-basis-point hike.

Government bonds weakened alongside the currency, pulling the yield on debt due in 2026, 2.5 basis points higher to 8.36%.

The Johannesburg Stock Exchange's Top-40 index fell 0.52% to 45 379 points and the broader All-share index lost 0.6% to 50 737 points.

Investors continue to be unsettled by concerns about global growth following China's recent market turmoil and the Fed's downbeat comments about global growth.

Global miners eased, with Anglo American [JSE:AGL] down 2.5% to R146.25 and rival BHP Billiton [JSE:BIL] gave up 1.13% to R225.72.

Trade on the exchange was robust with more than 190 million shares changing hands, above last year's daily average of 183 million shares.