July 2, 2019 / 4:23 PM / 2 months ago

UPDATE 1-South Africa's rand firms as dollar slips, stocks down

(Updates prices, adds stocks)

JOHANNESBURG, July 2 (Reuters) - South Africa’s rand firmed against the U.S. dollar on Tuesday, helped by a weaker greenback as optimism about easing trade tensions between the United States and China faded, while stocks fell due to profit-taking.

At 1535 GMT, the rand was 0.35% firmer at 14.0900 per dollar, as the U.S. currency slipped from two-week highs.

A trade truce between the United States and China on the sidelines of the G20 summit over the weekend had calmed fears and boosted the dollar, but negotiations are ongoing.

The tone changed after U.S. President Donald Trump said any deal would need to be somewhat tilted in favour of the United States, arguing that China has long had a trade advantage.

The rand had gained strongly in the previous month along with other emerging assets as the greenback slumped over the likelihood of lower U.S. lending rates.

“While the rand is likely to continue to gain from perceptions, and particularly the occurrence, of global monetary policy easing, the third quarter tends be a quarter in which financial markets often experience risk-off,” said Annabel Bishop, chief economist at Investec.

“In particular, fears of slowing global economic growth have impacted markets, and could limit EM currencies gain in Q3.19,” Bishop added in a note.

On the bourse, stocks weakened with the Top-40 index down 0.71% to 52,093 points while the broader All-Share Index fell 0.65% to 58,095 points.

Profit-taking and waning investor optimism over the trade talks saw local equities, alongside most emerging market peers, lose some of the gains they had made on Monday.

“There’s been a little bit too much optimism backing already so we saw a bunch of profit-taking,” said Thebe Stockbroking private client trader, Robert Cameron.

Fashion retailer Truworths fell 5.03% to 68.85 rand after it said its British footwear chain Office has entered debt restructuring talks with its lenders amid tough trading conditions.

In fixed income, the yield on the benchmark 10-year government issue <ZAR186= > added 2.5 basis points to 8.15%. (Reporting by Olivia Kumwenda-Mtambo and Naledi Mashishi; Editing by Andrew Cawthorne)

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