Rand falters as U.S. rate risk resurfaces

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May 27, 2016 7:34 PM

By 0700 GMT the rand had slipped 0.4 percent to 15.5820 per dollar, weaker than its close at 15.5200 in New York.

South African rands note in a file photo. REUTERS/Siphiwe Sibeko

South Africa's rand edged weaker on Friday as risk appetite faded globally before a speech by the United States central bank that could signal higher interest rates, drawing investor attention away from domestic issues.

The rand sunk the session low as traders anticipated that Federal Reserve chairwoman Janet Yellen's would confirm the bank intentions to raise interest rates soon.

Data from China showing profits of industrial firms slowed in April further dampened sentiment toward commodity-exporting emerging economies.

Traders said they expected the rand to remain in a recent narrow range with no major data releases due in the session.

"The squaring up of speculative positions has already commenced," said chief trader at Standard Bank Warrick Butler. "Markets are all about S.A. (South Africa) politics, U.S. rates and China growth."

Ratings agency Fitch warned on Thursday that political wrangling ahead of local elections in August posed a risk to the country's credit status.

Fitch and Standard and Poor's are expected to decide whether to cut South Africa's rating to subinvestment grade next month.

Bonds were flat in early trade, with the yield on the benchmark government issue due in 2026 unmoved at 9.37 percent.

On the bourse, the Top-40 futures index was up 0.5 percent, indicating markets would open firmer when trade commences at 0700 GMT.

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