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South Africa's rand steadies as markets await Fed verdict
JOHANNESBURG, July 31 (Reuters) - South Africa's rand
steadied against the dollar in late trade on Wednesday, as
investors awaited a likely cut in interest rates by the U.S.
Federal Reserve, shifting the spotlight away from domestic
Stocks fell as a weaker-than-expected performance by
AngloGold Ashanti put pressure on gold shares, wiping
out any benefit from stronger prices for the precious metal.
At 1510 GMT, the rand was trading at 14.1800, not
far off a close of 14.2050 on Tuesday.
The U.S. Federal Reserve is expected to cut interest rates
for the first time in more than a decade. The policy
announcement is scheduled to be released at 1800
Investors will focus on whether the Fed leaves the door open
for further easing.
"The tone of the statement will be under much scrutiny for
guidance on what to expect next," RMB analysts Siobhan Redford
and Kate Rushton said in a note.
"While today may mark the end of the "waiting" for the Fed's
July announcement, the likelihood that it will emphasise that
future decisions will be data-dependent will leave markets
scrutinising all new data as it comes out."
The South African currency has largely ignored local economic
problems, such as weak unemployment figures and financial
troubles at power utility Eskom.
Eskom said on Tuesday it expected a loss of around 20
billion rand ($1.4 billion) this financial year. Lack of
improvement in its financial position indicated it would be
unable to meet its obligations without government help.
"There are many in the market questioning why the rand is
not blowing off more than it has. Eskom is producing major
losses, there are bailouts galore, and the budget deficit is
blowing out to 6% or more," ETM Analytics said in a note.
On Tuesday, data showed unemployment rose to an 11-year high
in the second quarter, underscoring the country's fragile growth
outlook. But early on Wednesday markets were looking ahead to
the Fed rate decision later in the session.
The Johannesburg Stock Exchange's broader all-share index
declined 0.8% to 56,784 points, while blue-chip firms
on the top-40 index fell 0.8% to 50,799 points.
AngloGold led the declines on the blue-chip index, shedding
5.37% to 255 rand, while Gold Fields also slipped 4.53%
to 76 rand and Anglo American Platinum lost 1.78% to
"AngloGold came out with a trading statement, which was
below expectation, which has obviously put pressure on the whole
gold sector, driving all of them down ... even with the weaker
rand and the stronger gold," said Mike Westerhos, an equity
trader at AG Capital.
Yields on the benchmark 10-year bond added 1.5 basis points
($1 = 14.1666 rand)
(Reporting by Olivia Kumwenda-Mtambo and Onke Ngcuka. Editing
by Jane Merriman)
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