South African rand extends losses on stronger dollar, US yields

JOHANNESBURG (Reuters) -The South African rand extended losses on Tuesday, bearing the brunt of the stronger dollar and surging U.S. Treasury yields, analysts said.

At 1540 GMT, the rand traded at 19.3700 against the dollar, 0.81% weaker than its previous close.

The dollar last traded around 0.2% firmer against a basket of global currencies.

On Monday the rand slumped about 1.5%, dragged down by a buoyant dollar and a local purchasing managers’ survey that showed factory activity shrank for the eighth month in a row.

The rand has had a turbulent year, falling to an all-time low against the dollar in June, recovering some ground and then slipping again. It is down more than 13% against the greenback year to date.

South Africa’s energy department said on Tuesday that the price of petrol will increase by up to 114 cents a litre, while the price of diesel will rise by up to 197 cents a litre.

“The significant fuel price increases will result in an unwelcome U-turn in headline inflation,” independent economist Elize Kruger said in a research note.

“Such a notable deterioration in the headline CPI forecast, as I now expect to play out, is likely to increase the risk that interest rates might be hiked further,” Kruger added.

On the Johannesburg Stock Exchange, the blue-chip Top 40 index closed around 0.6% lower.

The benchmark 2030 government bond was weaker in afternoon deals, with the yield up 12 basis points to 11.020%.

(Reporting by Tannur Anders and Anait Miridzhanian; Editing by Shounak Dasgupta)