JOHANNESBURG – The rand stumbled 2 percent to its weakest in more than three weeks against the dollar on Wednesday, hit by concerns about the ailing economy.
Stocks inched lower as low-income group lender Capitec Bank said it had been sued for allegedly offering short-term unsecured loans that amounted to “reckless credit”.
The rand hit a session trough of 14.9450, its softest since April 11 according to Thomson Reuters data. By 1620 GMT it was still down 1.7 percent on the day at 14.8950, the worst performance in a basket of emerging market currencies.
The rand took the brunt of a general sell-off in riskier assets due to worries about a global economic downturn.
South Africa’s own economy is also struggling to grow, and Finance Minister Pravin Gordhan on Wednesday singled this out as a pressing challenge for the government.
“The rand will likely remain a proxy both for emerging market currencies and risk-aversion, and with the U.S. yet to begin hiking rates further volatility is likely,” Investec analyst Annabel Bishop said in a note.
Government bonds took their cue from the rand, and the yield for the benchmark maturing in 2026 closed up 7.5 basis points at 9.185 percent, its highest in just over three weeks.
In equities, the broader All-Share shed 0.07 percent to 51,873 points while the benchmark Top-40 index clawed up 0.02 percent 45,559 points.
Capitec Bank, which grants loans not supported by assets, confirmed it had been as sued by a financial advisory firm for allegedly offering short-term unsecured loans.
Capitec shares, which fell in the previous session along with other banks, dropped 3.89 percent to 557 rand on Wednesday.
“Looking at Capitec, they’ve been sued by Summit Partners for alleged reckless lending practices, which would explain the second day of severe losses on the share,” Inkunzi Investments trader Petri Redelinghuys said.