Rand falls as China Evergrande anxiety saps risk appetite

Investors are concerned that a collapse at Evergrande could hurt an already fragile Chinese economy and drag on global growth. File photo.

Investors are concerned that a collapse at Evergrande could hurt an already fragile Chinese economy and drag on global growth. File photo.

Published Oct 4, 2021

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JOHANNESBURG – South Africa's rand weakened early on Monday, as concerns about China's property sector and expectations that elevated inflation could prompt the US Federal Reserve to bring forward its tapering timeline weighed on emerging market currencies.

At 0615 GMT, the rand traded at 14.9300 against the dollar, 0.35% weaker than its previous close.

The rand has tended to take its cue from global factors in recent weeks, with investors in a cautious mood on Monday as shares in embattled developer China Evergrande were halted in Hong Kong, rekindling market nerves about the possibility of contagion.

Investors are concerned that a collapse at Evergrande could hurt an already fragile Chinese economy and drag on global growth.

The outlook for US monetary policy was also in focus after data on Friday showed core US PCE price index, the Fed's preferred inflation measure for its flexible 2% target, increased 3.6% in August from a year earlier, its biggest rise in three decades.

Rising commodity prices and ongoing supply disruptions have also fuelled expectations global inflation could stay higher for longer.

Investors are now eyeing a key US jobs report due on Friday that could influence the Fed's timeline for tapering its asset purchases and raising interest rates.

Higher US rates often drain capital away from higher-yielding, but riskier emerging markets such as South Africa, weighing on their currencies.

BUSINESS REPORT ONLINE

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