BLBG:Rand Slips Against Dollar on Concern Europe’s Debt Crisis Will Slow Growth Q
The rand declined against the dollar on concern the global economy will slow as European leaders struggle to stem the region’s debt crisis, damping demand for South Africa’s commodity exports.
South Africa’s currency weakened as much as 0.6 percent to 8.1994 per dollar, and traded 0.1 percent down at 8.1540 as of 11:33 a.m. in Johannesburg. Against the euro, the rand gained 0.3 percent to 10.9931.
Commodity prices declined for the first time in three days, according to the Standard & Poor’s GSCI Index. The uncertain global economic outlook created by the European debt crisis is putting pressure on the prices of commodities including iron, Marius Kloppers, chief executive of BHP Billiton Ltd., the world’s biggest mining company, said today.
“The risk posed to the global economy by the sovereign debt crisis in Europe is high and increasing,” John Cairns a currency strategist at Rand Merchant Bank in Johannesburg, said in a research note. “The risk of a major fallout and negative consequences for the rand is high.”
Spain will auction as much as 4 billion euros ($5.4 billion) of debt today while France sells as much as 8.2 billion euros of securities. The extra yield investors demand to hold euro-area bonds over German bunds was at almost euro-era highs yesterday.
The euro-area economy is heading toward a “mild recession” by the end of the year, European Central Bank President Mario Draghi said on Nov. 3.
South Africa’s benchmark stock index declined 0.6 percent today, led by commodity exporters including BHP Billiton and Anglo American Plc. Raw material exports account for about 45 percent of South Africa’s foreign currency earnings, according to South African Revenue Service data.
South Africa is “export-oriented which makes it exposed to slowdown risks,” Benoit Anne, the London-based head of emerging-market strategy at Societe Generale SA, said by email. SocGen recommends selling the rand against the Turkish lira.
South Africa’s 6.75 percent bonds due 2021 gained for a second day, driving the yield down one basis point, or 0.01 percentage point, to 8.045 percent.
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
