South Africa's rand slips but set for weekly gains

JOHANNESBURG: South Africa's rand backtracked on Friday, surrendering the previous session's gains as rising US Treasury yields hit global risk demand.

At 1500 GMT the rand was 0.8% weaker at 14.9700 per dollar in another turbulent session driven by offshore events, especially inflation in the United States and rising COVID-19 infections around the world. It had touched its best level in two weeks on Thursday at 14.80.

Investors fear higher Treasury yields, which shot back up on Friday, could lead the Federal Reserve to rein in its quantitative easing program and allow lending rates to rise, drawing money away from high yielding, but risky currencies like the rand.

Despite Friday's dip, the currency was still up more than 4% since Monday.

"Price action counts for a lot, and the currency's resilience suggests fundamentals still favour the rand," said Nedbank currency strategist Walter de Wet.

"From a domestic perspective, three obvious factors are in favour of the currency: strong commodity prices, a strong trade surplus, and high real government bond yields."

The yield on the long-dated benchmark government bond due in 2030 was up 9 basis points to 9.350%.

Stocks also struggled, with the Johannesburg Stock Exchange (JSE) posting its biggest fall in two weeks as investors shed banking, mining and gold stocks on the rising yields in the US and Europe.

The bluechip FTSE/JSE top 40 companies' index was down almost 1% to end the week at 62,588 points, while the all-share index slipped 0.82% to 68,210 points.

Index heavyweights Naspers Ltd, and its subsidiary Prosus NV, lost more than 5% after China's market regulator fined technology giant Tencent Holdings for violating anti-monopoly rules.

Naspers, through Prosus, holds a 31% stake in Tencent, shares of which fell 4.4% on Friday.

South Africa's bank index fell by 0.25% and the mining or resources index 0.42%. The gold index was the worst performer, falling by 2.74% as gold prices dropped by almost 1%.