Strikes weigh on rand, SA assets

Johannesburg - The rand slipped on Thursday after posting strong gains this week, while bond prices fell on concerns over the US debt standoff and stocks fell for the fourth straight day.

Mining stocks fell as unions went on strike, helping drag down the resource-heavy Top-40 index of blue chips by 0.52%. The All Share [JSE:J203] index fell 0.47%.

Investors were loathe to hang on to long high-risk assets before US lawmakers vote on a deficit-reduction plan aimed at averting the threat of a default, which has unsettled markets.
 
Local data showing unemployment rose in the third quarter added to the negative sentiment, highlighting a challenge that could stoke social instability in future.
 
The rand was trading at R6.7030/$ in early evening trade, 0.3% weaker than Wednesday’s New York close of R6.6820/$. It hit a fresh two-month high of R6.6250/$.
 
“We have that US vote tonight so the market is a little gun-shy,” said Warrick Butler, dealer at Standard Bank.
“We’ve seen a lot of local demand for dollars as well as real money selling off bonds, so we had another move up to R6.7150. The market is nervous so there’s a lot of off-loading because we’ve had a good run for some time.”
 
Offshore investment into local bonds has helped to support the rand and it is one of the top three performers so far this year amongst emerging market currencies tracked by Reuters.

Bonds weakened slightly on Thursday, with the yield on the 2015 bond up a basis point to 7.37 and that on the 2026 paper ticking up by the same margin to 8.515%.

The break of 7.36% on the 2015 bond opens up for 7.20% in the weeks to come, said market researchers Tradition Analytics in a note.
 
Monetary policy is expected to remain accommodative for the rest of this year and interest rates are seen starting to rise from 30-year lows early next year.