Johannesburg - South Africa's rand retreated more than two percent on Tuesday as domestic political rifts and continued uncertainty about the direction of global interest rates in United States and Europe weighed on investors.
Stocks ended largely unchanged, with mining stocks under pressure as gold and platinum prices weakened, weighed down by a firmer dollar and uncertainty over whether the U.S. will raise interest rates next week.
By 16:10 GMT the rand was 2.0 percent weaker at 14.5200 per dollar, losing ground after the dollar rallied on the day as risk aversion increased globally
The decline wiped out earlier gains after the currency rallied in response to data showing the current account deficit had narrowed more than expected.
Political uncertainty also clouded the market despite President Jacob Zuma's attempts to brush aside market fears of a power struggle with Finance Minister Pravin Gordhan, who is facing a police investigation that the opposition has called a witch-hunt meant to remove the minister.
Analysts said although the data was encouraging, it would do little to ease the likelihood of a downgrade or higher domestic interest rates in the face of low growth before year-end.
“The MPC is expected to focus more on the upside risk to inflation emanating from the rand's sharp slide in recent weeks and the threat of even further weakness in the months ahead,” economists at Nedbank said in a note.
The South African Reserve Bank's monetary policy committee (MPC) decides on interest rates on Sept. 22, having kept them on hold at 7 percent at its last two meetings.
Government bonds weakened, with the yield on the benchmark 2026 issue adding 1.5 basis points to 8.725 percent.
On the stock market, the benchmark Top-40 index ended almost flat, up 0.04 percent to 46,274 points. The All-Share index ticked up 0.01 percent to 52,806 points.
Gold and platinum prices weakened, with AngloGold Ashanti sliding 2.89 percent to 227.00 rand, while platinum producer Anglo American Platinum dropped by 0.73 percent to 402.49 rand.
“Resources are for the most part under pressure for the day, the currency has had a part in that but also the underlying metals prices,” said Independent Securities trader Ryan Woods.
“There is nervousness about what's going on in the U.S.,” he said on the Federal Reserve's decision on interest rates.
Reuters