September 17, 2019 / 4:24 PM / 3 months ago

UPDATE 1-South African rand hurt by oil price spike

(Adds latest prices, analyst comments)

JOHANNESBURG, Sept 17 (Reuters) - South Africa’s rand extended its losses on Tuesday to a one-week low as heightened tensions in the Middle East after the weekend attack on Saudi Arabia’s crude oil facilities soured risk demand globally.

At 1530 GMT the rand was 0.46% weaker at 14.7325 per dollar, having slipped to 14.8425 earlier, its weakest level since September 9 and closer to the 15.00 mark that could trigger further selling.

South Africa is a net importer of oil for fuel and other industrial inputs and the spike in crude prices, up nearly 15% at close on Monday before retreating on Tuesday, will likely push up inflation and hurt already anaemic consumer spending.

Brent crude traded at $65.37 per barrel at 1530 GMT, down about 6% from Monday’s high of $71.35. The jump in oil prices has lifted market volatility with run-on risk may offset any rate move by the Federal Reserve this week.

The Fed is seen lowering rates on Wednesday, a move that would typically support the rand, but the currency’s use as a risk and emerging market proxy looks set to outweigh the Fed move.

“We’re seeing a structural change increase in the oil price after the Saudi attacks, and a rise in prices across the Brent curve. You’re likely to see this reflected in inflation in coming months in things like transport, said Kieran Siney of ETM Analytics.

South Africa’s statistics agency publishes August inflation figures on Wednesday, while the central bank decides on lending rates on Thursday.

Bonds were weaker, with the yield on the benchmark instrument due in 2026 adding 4.5 basis points to 8.26%.

In equities, stocks weakened with the broader All-share index down 1.66% to 56,895 points, while the benchmark Top-40 index declined 1.79% to 50,873 points.

Dragging the bourse downwards was petrochemicals group Sasol which lost 4.9% to 291.00 rand as oil prices retreated again on Tuesday.

“There’s reports that the Saudi Arabian refinery is going to be back on the stream in two or three weeks and the oil price has taken quite a big smack, Sasol dragging our index on the back of that,” said Nick Kunze, portfolio manager at Sanlam Private Wealth.

Banking stocks also shed 3.41%, with FirstRand down 4.9% to 64.71 rand, while Nedbank slipped 3.64% to 242.09 rand and Standard Bank declined 3.36% to 186.79 rand.

Gold stocks however were up 3.11% as investors sought a safe haven. Sibanye-Stillwater gained 6.72% to 17.62 rand, AngloGold up 3.21% to 290.50 rand and Harmony increased 2.56% to 45.19 rand. (Reporting by Mfuneko Toyana and Onke Ngcuka Editing by Alistair Bell)

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