Update 1- South African markets stumble on a new form of COVID-19

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JOHANNESBURG (Reuters) – The South African rand fell below 16.00 to the dollar for the first time this year on Friday as investors worried about the discovery of a major variable from the coronavirus in the country, and government bonds and stocks fell.

The decline in stock prices led the sharp decline in shares of the hospitality sector, as Britain and some other countries imposed restrictions on travel to South Africa and its neighbours.

Britain also said that because of the mutations, scientists considered the virus variant to be the most important to date.

“Risk-free trading as a new COVID-19 variant in South Africa is likely to be the Grinch stealing Christmas,” analysts at ETM Analytics said in a note.

“Momentum has already been on the upside for the US dollar due to taking a stance for further monetary tightening (the Federal Reserve) in the coming months, and the discovery of this new alternative… will severely reduce ZAR’s resilience against the broader dollar movement.”

At 0725 GMT, the rand was trading at 16.2200 against the dollar, 1.52% weaker than its previous close.

In fixed income, the 2030 benchmark yield jumped 24.5 basis points to 9.97%.

South African scientists said Thursday they have discovered 19 new species that contain a “very unusual constellation” of mutations, which were of concern because they could help evade the body’s immune response and make them more transmissible.

In the stock market, both the Top-40 and the broader share are down about 2% in early trading.

Losses topped City Lodge Hotels, down 20%.

Shares of Sun International, owner of casinos and hotels including the Sun City resort, fell by about 14%, while shares of Tsogo Sun Hotels fell by more than 11%. (Reporting by Olivia Komwenda Mtambo; Editing by Shalish Cooper and John Stonestreet)

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