Africa

South African rand weakens on risk aversion

2 minute read

South African Rand coins are seen in this illustration picture taken October 30, 2020. REUTERS/Mike Hutchings/File Photo

JOHANNESBURG, Sept 20 (Reuters) - South Africa's rand weakened on Monday, tracking other risk and commodity currencies, as concerns about property group China Evergrande's solvency stoked risk aversion, while traders awaited the outcome of this week's U.S. Federal Reserve policy meeting.

At 1500 GMT, the rand was trading at 14.7900, down 0.73% from Friday's close, and having lost more than 4% since Sept. 10.

The dollar climbed as investors turned risk averse amid concerns around debt-laden Chinese developer Evergrande's (3333.HK) inability to pay part of its huge debt due on Thursday.

The Chinese developer's woes come in the midst of several regulatory crackdowns by Chinese authorities on digital companies, eroding investors' confidence in the world's second biggest economy and instilling fears around its prospects.

Investors will also be closely watching the South African Reserve Bank's monetary policy meeting news conference on Sept. 23 to get a steer on where interest rates are headed in the continent's most advanced economy.

The market will also track local Consumer Price Index (CPI) numbers on Sept. 22 and the U.S. Federal Reserve's policy meeting, due to end on Wednesday, for indications on when it will start tapering its bond purchase programme.

"Global financial market sentiment, and the rand, would be further weakened from current levels if the Fed says this week that it would, as opposed to may, be appropriate to start reducing asset purchases this year," said Investec economist Annabel Bishop.

South African government bonds also weakened, and the yield on the instrument due in 2030 up 7.5 basis points to 9.060%.

Stocks too were down, with the Johannesburg Stock Exchange's Top-40 Index (.JTOPI) slipping 2.4% to 55,246 points and the broader All-Share Index (.JALSH) losing 2.2% to 61,453 points.

Insurer Discovery (DSYJ.J), which has exposure to the Chinese market via a partnership with fellow insurer Ping An (601318.SS), was the biggest loser on the blue-chip index, shedding 6%.

Reporting by Olivia Kumwenda-Mtambo Editing by Alistair Bell

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