UPDATE 1-South African rand weakens as lower growth is forecast; stocks gain

  • Reuters
  • Forex News
UPDATE 1-South African rand weakens as lower growth is forecast; stocks gain

* Rand turns flat after IMF cuts growth forecast
* Financials lead stocks higher

(Updates rand after IMF report, adds stocks closer)
JOHANNESBURG, July 7 (Reuters) - South Africa's rand
relinquished earlier gains against the dollar on Thursday after
the International Monetary Fund cut the 2016 domestic growth
forecast to barely above zero percent.
Stocks rose, however, led by financial services.
At 1700 GMT, the rand ZAR=D3 traded at 14.7480 per dollar,
up just 0.03 percent from its New York close on Wednesday. It
had earlier touched a session high of 14.6000/dollar and traded
at 14.6520 just before the IMF report came out at 1345 GMT.
The Fund forecast growth at just 0.1 percent in 2016, down
from the 0.6 percent it estimated in May. It cautioned the
central bank not to raise interest rates further unless
inflation expectations rose significantly
Analysts expect the rand to remain under pressure this year
as sluggish growth raises the risk South Africa's credit rating
will be cut below investment grade by the end of the year.
"We think the South African economy will contract by 0.2
percent this year before staging only the most muted of
recoveries in 2017," HSBC analyst David Faulkner said in a note.
Stocks fared better than the rand, with the benchmark Top-40
index .JTOPI adding 0.68 percent to 44,802 points while the
All-Share index .JALSH rose 0.56 percent to 51,097 points.
Financial services company Finbond FGLJ.J climbed 7.33
percent to 3.22 rand. Investment holding firm RMB Holding
RMHJ.J rose 3.77 percent to 55.00 rand and FirstRand Limited
FSRJ.J added 3.36 percent to 43.65 rand.
Trading volumes were low, with a total of 208 million shares
changing hands compared with last year's daily average of 280
million.
In fixed income, the yield for the benchmark instrument due
in 2026 ZAR186= dipped 3.5 basis points to 8.775 percent.

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