South Africa's rand lifted by dovish Fed comments, stocks fall

JOHANNESBURG: South Africa's rand firmed against a softer dollar on Thursday, in line with emerging markets and a fall in bond yields, as dovish comments from U.S. Federal Reserve Chairman Jerome Powell boosted demand for riskier assets.

Stocks were weighed down by market heavyweight Naspers  and losses in so-called rand hedges - dual-listed shares that normally benefit when the rand weakens.

At 1453 GMT, the rand was trading at 13.6250 per dollar, 1.16 percent firmer than its New York close of 13.7850. The currency touched an intraday best of 13.6100.

"The rand's robust performance has a lot to do with what the Fed Chairman said yesterday in regards to the hiking cycle, which opened the door for risk sentiment, as the stance was less hawkish," said ETM economist Halen Bothma.

Comments from Powell that U.S. interest rates were "just below" neutral put the dollar on the back foot. nL4N1Y437X]

The rand hit near 4-month highs, shrugging off data showing that credit demand growth had slowed in October.

"The rand has gained most of its ground it lost in August and could see further gains. However, it will depend on the G20 meeting and local data," said Bothma.

The market is closely watching a meeting between U.S. President Donald Trump and Chinese leader Xi Jinping at the G20 summit on Saturday at which the leaders are expected to discuss trade.

Bonds also firmed, with the yield on the benchmark bond due in 2026 down 14 basis points to 8.900 percent.

"Local bonds also did well, (with the yield) down over 10 basis points, one of the bigger moves we've seen since the end of September," said Bothma.

In equities, the All Share index was down 0.30 percent at 51,737 points, while the blue chip Top 40 index  fell 0.21 percent to 45,703 points.

"Volumes have been a bit better and we have performed well despite Naspers and the rand hedges weighing on the market," said Ryan Woods, trader at Independent Securities.

Naspers slipped by 2.57 percent to 2,820 rand after Hong Kong technology giant Tencent, in which it has 31 percent stake, closed lower along with Asian markets.

Rand hedges such as luxury retailer Richemont slid 1.30 percent to 90.80 rand, weighed down by a firmer local currency.