The rand fell 1 percent against the dollar yesterday to its softest level in nearly a week, after data showed that the economy shrank in the first quarter of the year, raising the spectre of a recession.

The data undermine the case for more interest rate hikes this year after the central bank last lifted its benchmark rate by 50 basis points in January. The rand hit a session low of R10.4690 to the dollar. At 5pm, it was bid at R10.4487.

“Essentially the GDP [gross domestic product] move led to an extension of rand weakness that had started earlier on in the session already,” ETM market analyst Sean McCalgan said.

Stocks snapped six consecutive sessions of gains yesterday, declining 0.33 percent after the data bruised market sentiment. The gloomy numbers gave investors an excuse to cash in stocks after the all share index topped 50 000 for the first time last week.

“It’s a reality check and we could see some profit-taking,” said Christie Viljoen, an analyst with NKC Independent Economists. “With today’s GDP numbers, we may see a pullback away from 50 000 in the short term.”

The Top40 index fell 0.33 percent to 44 859.43 while the all share lost 0.39 percent to 49 824.45. – Reuters page 24