JOHANNESBURG: South Africa's rand edged weaker on Tuesday, losing momentum as the dollar surged and the appeal of th
JOHANNESBURG: South Africa's rand edged weaker on Tuesday, losing momentum as the dollar surged and the appeal of the local currency waned after the International Monetary Fund cut its growth forecast for Africa's most industrialised economy.
At 1515 GMT the rand was 0.16% weaker at 13.8800 per dollar compared to its close of 13.8575 overnight in New York.
The greenback rose to near a five-week high against a basket of currencies after President Donald Trump and US lawmakers reached a two-year deal that raises the limits on government borrowing to cover spending.
On Tuesday the IMF, in its World Economic Update, slashed its 2019 economic growth expectation for South Africa to 0.7% from 1.2% in April, and to 1.1% in 2020, citing weak first quarter growth and energy supply issues as the main drag on the outlook.
Globally, the IMF expects GDP to grow 3.2%, while economic growth in sub-Saharan Africa is seen at 3.4%.
The rand's recent gains, about 2.5% in the past two weeks as bets of rate cuts in the United States and Europe contined to support high-yielding emerging market currencies, have now hit a technical barrier, traders said.
"The 13.81/8200 is proving a very tough support level for the USD-ZAR. Seven attempts to crack below this level make it an important technical support barrier to break through if any further rand appreciation is to materialise," ETM Analytics said in a note.
Bonds also weakened, with the yield on the benchmark 2026 government issue up 4 basis points to 8.07%.
Stocks rose along with some emerging market peers amid expectations that central banks around the world would cut interest rates soon.
The Johannesburg All-Share index rose 0.51% to 58,309 points, while the Top-40 index increased 0.61% to 52,209 points.
Markets are focusing on the European Central Bank (ECB), which is expected to cut a key rate by 10 basis points on Thursday, and next week the Federal Reserve is forecast to cut its benchmark rate by 25 basis points.
Among the leading blue-chip gainers, paper and packaging firms Sappi and Mondi rose 2.50% and 2% respectively.
Miner Kumba Iron Ore Ltd jumped more than 6% after it saw its first-half earnings soar 239% as it benefited from higher iron ore prices and a weaker rand/dollar exchange rate.
But the shares then gave up most of those gains as analysts said the high iron price was unsustainable. It closed 2.93% lower at 475.90 rand.