South African rand dips on trade war jitters, stock rise

JOHANNESBURG: South Africa's rand weakened on Monday, slipping back above a crucial psychological level as higher bets of an interest rate hike by the local central bank later in the week were overshadowed by the simmering U.S.-Chinese trade dispute.

Stocks edged up, led by Netcare after the private hospital group said it would pay investors a special dividend, as well as strong gains by financial firms lapping up the local currency's recent rally.

At 1530 GMT the rand was 0.15 percent weaker at 14.0025 per dollar, crossing back above the key 14.00 mark as early gains that saw it touch a session-best 13.9200 were scuttled as New York traders came on-line.

Bets that the Reserve Bank (SARB) will lift lending rates at its final meeting of 2018 on Thursday has lured some yield-seeking investors back into the rand, but the optimism has been short-lived with a tariffs deal between Washington and Beijing looking increasingly remote.

U.S. Vice President Mike Pence said on Saturday the United States would not back down from its trade dispute with China, and might even double its tariffs, unless Beijing bows to U.S. demands.

In a Reuters poll conducted last week, 16 of 26 economists said the SARB would keep its repo rate at 6.50 percent while the rest forecast a 25 basis-point hike.

"Markets have only partially priced in an interest rate hike and if the SARB delivers, the rand is likely to appreciate. However, the rand's vulnerability to global and domestic risks should limit the appreciation," said analyst at Commerzbank Elisabeth Andreae.

Bonds ended slightly weaker, with the yield on the benchmark paper due in 2026 adding 0.5 basis points to 9.11 percent.

On the bourse, the benchmark Top-40 index was up 0.74 percent at 46,188 points while the broader All-share index  rose 0.63 percent to 52,423 points.

The financials index was up 1.1 percent, with investment bank PSG Group climbing 3.14 percent to 235,37 rand, followed by Absa and Sanlam which both rose more than two percent to 159,13 rand and 78,76 rand respectively.

Shares of the country's second-largest private hospital firm Netcare climbed 3.67 percent to 25,70 rand.

On Monday the firm announced a special dividend payout of 40 cents per share after reporting a marginal rise in full-year earnings.