STOCKS, the oil price and emerging market currencies fell on Thursday as fading expectation of an imminent US interest rate hike stoked anxiety about the health of the global economy.
The rand dropped to a 13-and-a-half-year low against the dollar, to more than R13/$ and reached more than R20/£, but later recovered.
It was weighed down by a decline in commodity prices this year that threatens to slow growth amid a sell-off in emerging markets.
Some traders said there were sustained attacks on the local currency to push it below the psychologically important R13/$ level, despite fundamentals actually supporting a stronger rand yesterday. The dollar was weaker in early-morning trade and some commodity prices were up, factors that usually supported the rand, they said.
The rand weakened to R13.0038/$ in midday trade, but soon recovered to R12.93/$.
Bonds also showed little reaction to the global selloff with the R186 trading stronger at 8.275% after weakening from a previous close of 8.29%.
Although the JSE closed down amid weak global markets, platinum and gold miners, together with resources, staged a strong recovery from oversold levels as commodity prices rallied.
At the JSE’s close the gold price was 1.01% higher at $1,145.77.
"The strong performance in miners was due to technical breakthroughs and not so much related to the rand falling to R13/$, as it was expected, although the rand remains weak," BP Bernstein Stockbrokers portfolio manager Vasili Girasis said.
Stocks and currencies in developing nations fell as pressure mounts on countries that trade with China to let their currencies weaken on concern the yuan’s devaluation last week will make exports less competitive.
Minutes from the US Federal Open Market Committee’s July meeting, released on Wednesday evening, seemed to cast doubt on the possibility of a rate increase next month.
The Federal Reserve said most members "judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point".
Policy makers expressed concern that spillovers from slower economic growth in China, as well as a stronger dollar, posed a threat to the US economy, and some felt there was still room for improvement in the labour market.
European stock markets extended their losing streak with benchmark indices in Frankfurt and London hitting seven-month lows as fears of a global economic slowdown took hold.
The Athens stock market fell 3.5% as Greece looked set for new elections on September 20.
Emerging market stocks sank to the lowest level since 2009 and Kazakhstan abandoned its currency peg.
The tenge plunged by a record and Russia’s rouble was poised for its longest losing streak since December. The Shanghai composite index fell to a two-week low. Exchange-traded funds tracking stocks from China to Indonesia declined in US trading.
The MSCI emerging markets index lost 1.2% in New York, and was set for the lowest close since August 2009.
"It’s a vicious cycle," Spiro Sovereign Strategy MD Nicholas Spiro said. "All these factors are feeding on each other. The currencies under the most strain are those ticking most of these boxes."
Maarten Mittner BDLive and Agency Staff. Financial Times, Reuters, Bloomberg