South African rand firms on risk appetite, poor retail sales dent stocks

JOHANNESBURG: The South African rand hit a one-and-a-half month peak on Wednesday as risk appetite improved in the currency markets and it shrugged off data showing a plunge in local retail sales because of the coronavirus lockdown.

The rand was 0.08% firmer at 16.4000 per dollar at 1648 GMT, having reached 16.3450 earlier in the session, its best since June 10.

"As the worldwide race for a coronavirus vaccine gathers pace and fiscal stimulus uplifts global sentiment, investors seem to be favouring riskier currencies at the expense of the dollar," FXTM senior analyst Lukman Otunuga said in a note.

Market participants await US initial jobs claims data due on Thursday as well as the South African central bank's decision on lending rates.

The South African Reserve Bank (SARB) concludes its three-day policy meeting on Thursday, with lending rates expected to be cut by 25 basis points.

On the equities market, shares fell as a plunge in retail sales dented hopes of a swift economic recovery, while energy shares tracked a decline in oil prices.

Data on Wednesday showed retail sales fell by a record 50.4% in April and 12% in May, in the latest evidence of the impact of the early, stricter phase of the country's coronavirus lockdown.

Food and Beverages stocks were among the top decliners, falling 1.14% and 1.66% respectively. Along with general retailers, down 1.09%, they took the Johannesburg All-Share index 1.04% lower, while the Top-40 index fell 1.16%

Siphamandla Mkhwanazi, Senior Economist at FNB said in a note, shopping activity will normalise in the coming months as the economy gradually reopens, but anticipated consumer spending would take a significant knock this year from lockdown restrictions, loss of income and heightened uncertainty.

As oil prices fell on US government data showing a surprise rise in US crude inventories and on escalating tensions between the United States and China, Sasol, which faces lower raw materials costs, rose 5.07%.

Bond prices firmed. The yield on benchmark 2030 government paper was down 11 basis points at 9.195%.