Rand weakens as global market sell-off resumes

folarin okunola

January 26, 2016 10:39 AM

Stocks were also weaker in early trade, with the broader All-share index down 0.81 percent and the blue-chip Top-40 slipped 1.06 percent.

South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko

South Africa's rand weakened in early trade on Tuesday as an oil price plunge swung global markets away from riskier assets.

The rand was changing hands at 16.6100 to the dollar by 0652 GMT, 0.45 percent weaker than its 16.5400 Monday close in New York.

A renewed bout of negative sentiment concerning emerging markets ensured that the rand' s recovery came to a halt on Monday, filtering into early Tuesday trade as crude oil dropped below $30 a barrel.

"Considering this morning’s softness in commodity prices and fall in Asian equity markets, commodity-based currencies, including the rand, are likely to remain under pressure today," said Barclays Africa currency strategist Mike Keenan in a note.

In fixed income, government bonds tracked the rand lower as investors waited for clear signs of both the U.S. Federal Reserve monetary trajectory as well as the South African Reserve Bank's (SARB).

The yield on paper due in 2026 ticked up 5 basis points to 9.658 percent.

Investors will be cautious ahead of the SARB's monetary policy committee meeting beginning on Tuesday to determine its rate decision and an update on the bank's inflation and growth outlook on Thursday.

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