JOHANNESBURG (Reuters) - South Africa’s rand slipped to its weakest in three weeks on Friday as a recovering dollar and a warning by the finance minister that the country may need outside financial assistance to get out of an economic spiral weighed heavily on sentiment.
Stocks closed slightly higher with rand hedged companies benefiting from the weaker currency.
By 1515 GMT the rand had weakened 0.5 percent to 13.0800 per dollar, bring losses for the week to nearly 2 percent as simmering political and policy uncertainty made worse poor liquidity levels, that have in turn made holding the rand an even riskier bet.
The rand tumbled to a session low of 13.1425, its weakest since May 31, as the greenback turned positive following a modest rise in consumer spending that hardened investor bets of more rate hikes before the end of the year.
The local currency was wobbled by Finance Minister Malusi Gigaba’s comment that the country may require outside financial help, possibly from multilateral lenders like the IMF, to fund a widening budget shortfall and economic growth barely testing 1 percent.
The combination of weak growth, a swelling debt burden, credit downgrades and a fraught political atmosphere since President Jacob Zuma’s shock axing of Pravin Gordhan in March, have overshadowed the rand’s high-yield carry trade potential.
Trade volumes in the rand in June have been amongst the lowest in emerging market currencies, heightening the risk of sharp losses.
On the bourse, the benchmark Top-40 index rose 0.46 percent to 45,421 points, while the broader All-share index added 0.5 percent to 51,611 points.
Shares of companies with operations abroad that make the bulk of their revenue outside South Africa ,and tend to benefit from a weaker rand, helped to lift the bourse.
“The rand being weaker is helping the rand-hedged stocks,” said Sanlam Private Wealth director Greg Katzenellenbogen.
Britain-based property company Capital & Counties rose 1.26 percent to 49.90 rand, luxury goods maker Richemont gained 1.49 percent to 108.17 rand, while British American Tobacco picked up 0.78 percent to 893.45 rand.
Curbing further gains, bourse heavyweight Naspers fell 0.2 percent to 2545.00 rand after its subsidiary Myriad International Holdings B.V. (MIH B.V.) had successfully priced a $1 billion bond to fund a note repayment and acquisitions.
Bonds weakened sharply, with the yield on the bench mark paper due in 2026 rising 10 basis points to 8.8 percent.
Reporting by Mfuneko Toyana and Olwethu Boso