Rand falls as oil retreat rekindles growth worries

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February 3, 2016 5:11 PM

Stocks were set to open weaker at 0700 GMT, with the JSE securities exchange's Top-40 futures index shedding 0.41 percent.

A South African child holds a 50 rand note in a file picture - RTXI6ZY

South Africa's rand weakened in early trade on Wednesday as falling oil prices sparked a flight of capital into safer assets, dulling the appeal of the local currency.

At 0640 GMT the rand was down 0.31 percent at 16.2700 per dollar compared with Tuesday's close, pulling away from below the psychological 16 level it touched on Friday.

Oil prices continued to decline, stoking global risk-off sentiment as renewed worries over global growth came into focus.

"Global risk assets have taken a renewed hit. Risk sentiment seemingly remains driven by, or at least correlated with the oil price," Rand Merchant Bank's currency strategist JohnCairns.

The change in sentiment coincided with the news that the World Bank cut South Africa's 2016 growth forecast from 1.3 percent to 0.8 percent on Tuesday.

The forecast was in line with the latest projections from the South African Reserve Bank and the International Monetary Fund, which expect 2016 growth to be 0.9 percent and 0.7 percent respectively.

In fixed income, government bonds also weakened. The yield for debt maturing in 2026 rose 3 basis points to 9.425 percent.

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