UPDATE 1-South Africa's rand hits new 3-week low, stocks slip

(Adds latest prices, analyst comment)

JOHANNESBURG, July 31 (Reuters) – South Africa’s rand slumped to a new three-week low in an emerging market rout on Friday as investors’ hopes for a global recovery were dented by a sharp contraction in the U.S. economy.

At 1640 GMT, the rand was 1.63% weaker at 17.0250 per dollar, its weakest since July 8, adding to Thursday’s 2% plunge.

Sentiment towards the rand has been driven by offshore events in recent weeks, with stimulus programmes by developed market central banks and a relaxation of lockdown restrictions spurring the currency to pre-COVID-19 pandemic levels in June.

But signs of a resurgence in global infections have since tamed global demand for assets perceived as risky. That has put renewed pressure on the rand, which was already vulnerable given South Africa’s economic recession and jump in coronavirus cases.

“Fearful of the fundamental economic weakness across the globe, investors have fled to U.S. treasuries and gold. As you’d expect, EM (emerging market) currencies are struggling, with the rand surrendering 20c to the dollar,” said RMB’s Nema Ramkhelawan-Bhana.

Data on Thursday showed the United States, the world’s largest economy, contracted at its steepest pace since the Great Depression in the second quarter.

South African stocks dipped, tracking global markets.

The Johannesburg Stock Exchange’s Top-40 Index fell 0.16% to 51,369 points, and the broader All-Share Index closed down 0.22% at 55,722 points.

Among the fallers, the bullion sector shed 2.45%, with AngloGold Ashanti down 5.34% to 554.73 rand.

Shares in MTN closed down 2.46% after scrapping its 2020 interim dividend and announcing its CEO had been appointed to head the enterprise unit of British broadband and mobile operator BT from next year.

Bonds were firmer, with the yield on the benchmark government bond due in 2030 down 5 basis point to 9.245%. (Reporting by Mfuneko Toyana and Tanisha Heiberg; Editing by Mark Potter)

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