South Africa's rand hit an all-time low and stocks fell sharply on Monday, as rising concerns about waning growth in China hit commodity-linked currencies.
Rand hits record low, stocks tumble on China fears
"Fears over China’s economy have spooked the markets," Rand Merchant Trade analyst John Cairns said.
The weaker rand is likely to fuel inflation, putting pressure on the central bank to raise domestic rates further despite an economy struggling to grow in the face of South Africa's worst power crisis in seven years.
The rand recorded its biggest daily loss in 19 months, touching 14.0000 to the dollar, its weakest level on record according to Thomson Reuters data. By 0754 GMT it was trading at 13.2100, down 1.85 percent from Friday's close.
The local currency was among the weakest in a group of 25 emerging market peers as investors sold off high-risk assets amid worries about the impact of slowing global growth in the world's second biggest economy.
Chinese stocks plunged more than 8 percent on Monday, a tumble rooted in investor disappointment that Beijing did not announce expected policy support over the weekend after China's main market indexes shed 11 percent last week.
"Fears over China’s economy have spooked the markets," Rand Merchant Trade analyst John Cairns said. "Nerves were on edge after Wall Street dropped 3 percent on Friday, but an 8 percent drop in Chinese markets has seen panic spiral."
The rand, which is down more than 15 percent against the dollar this year, has been particularly vulnerable because of South Africa's weak fundamentals, including a wide current account balance and sluggish growth.
Charts showed that the rand had broken through the top of its four-year upward sloping channel trend line.
"A close above 13.50, being the top channel line level, on a weekly basis would ensure further woes for the rand over the next couple of weeks/months," Standard Bank trader Warrick Butler said.
The benchmark top-40 share index fell as much as 4 percent at the start of trade, led lower by MTN Group Ltd, which gets most of its revenue and profit from emerging markets, while most resources shares tumbled.
Government bonds were not spared the sell-off, pushing the yield for the 2026 benchmark to its highest in more than two months and reinforcing the case for local interest rates to rise further this year.
The yield for paper due in 2026 climbed as much as 13 basis points to 8.455 percent, a high last reached in mid-June.
The Reserve Bank raised the benchmark repo rate by 25 basis points to 6 percent in July, the first increase in a year, on signs inflation is steadily edging towards the top end of a 3-6 percent target band.
In neighbouring Zambia, Africa's second-largest copper producer, the kwacha currency tumbled, shedding more than 3.4 percent to an all-time low of 8.5750.
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