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South African rand hits 3-month low on soaring dollar

(Updates to reflect afternoon trading)

JOHANNESBURG, April 23 (Reuters) - South Africa's rand slumped to a three-month low on Monday, as emerging market currencies were pressured by a soaring dollar.

At 1515 GMT the rand was 1.4 percent weaker at 12.2600 against the U.S. currency after hitting its weakest since Jan. 18 earlier in the day.

Other emerging market currencies such as the Russian rouble and Brazilian real saw steep losses, as the dollar rallied to a seven-week high on the back of rising U.S. bond yields.

Hussein Sayed, chief market strategist at FXTM, said the rand could soon weaken beyond 12.30 to the dollar.

The sharp move in the rand comes at the end of a relatively quiet few weeks for the South African currency, which has traded in a tight range against the dollar.

Warrick Butler, executive head of rand trading at Standard Bank, said that despite Monday's slump "the overall trading environment remained cautiously optimistic".

The rand and South African assets surged in the wake of Cyril Ramaphosa taking the helm of the ruling African National Congress (ANC) in December. Ramaphosa, who then replaced Jacob Zuma as head of state in February, has promised to revamp the economy and woo foreign investors.

"There is still value to be found in our interest rate curve for foreign index trackers with a real interest rate return of over 2 percent," Butler said in a note to clients. "The inflow of foreign capital continues."

Rand-denominated bonds also fell on Monday, with the yield on the benchmark instrument due in 2026 up 11.5 basis points to 8.155 percent.

Trading on the bourse was mixed as stocks reacted to the weaker rand.

Financial and retail shares notched up the largest falls, with FirstRand weakening 3 percent and NedBank shedding 2.3 percent.

Miners with South African operations such as Anglo American and Gold Fields fared better, both rising more than 1 percent. The benchmark Top-40 index ended 0.22 percent higher at 50,877.98, while the wider All-share index climbed 0.17 percent to 57,679.51.

(Reporting by Alexander Winning and Nomvelo Chalumbira Editing by Alison Williams)

2018-04-23 17:35:57

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