JOHANNESBURG - The rand retreated again on Tuesday as turmoil in Italy sparked off a selloff on the euro that spread to emerging market currencies as investors avoided risk assets and fled to safe havens.
At 1500 GMT the rand was 0.77 percent weaker at 14.3350 per dollar, slightly better than the session low of 14.4450 hit in intra-day trade as news that Italy’s ruling party was considering a euro exit weighed down buyers.
At 07:30 on Wednesday morning the rand stood at R14.34 to the dollar.
The Italian lawmaker later rowed back on the comments about ditching the common currency, but by then the euro had dipped to a six-week low.
“Italy is a new headwind that’s put the breaks on the rand rally after a really good September, but it’s not the only issue,” said Halen Bothma of ETM Analytics.
The euro is often a barometer of global appetite for riskier assets like South Africa’s rand.
“You’ve got Moody’s probably putting out a decision next week and that puts the focus back on the local fiscal dynamics.”
Moody’s, the last of the top three ratings agencies to have Pretoria’s long-term foreign-currency debt at investment grade, said last month there was little chance it would cut the country to junk, but debt markets remain cautious with higher rates in the United States squeezing funding options.
In fixed income, the yield on the benchmark government bond due in 2026 rose 5 basis points to 9.09 percent.
Stocks were lower in line with other emerging markets.
The All-Share index fell 0.57 percent to 55,472 points while the Top-40 index was 0.65 percent lower at 49,263 points.
Shares in gold producers bucked the trend, rising 4.98 percent after spot prices edged up on Tuesday from recent lows, while the weaker rand also boosted metals exporters.
AngloGold Ashanti rose 4.05 percent to R125.62, the top performer on the blue chip index.
“It is also possible that people are buying gold as a hedge currently so our resources are back in favour again, at least in the short term,” said Vasili Girasis, equities trader at BP Bernstein.
Shares in South African construction group Group Five surged 14.74 percent after the company said it would cut more jobs as it seeks to trim loss-making divisions.