BLBG:Rand Weakens to Month-Low as Commodities Drop on Growth Concern
The rand fell to its lowest level against the dollar in more than a month as concern that an impasse over the U.S. budget cuts and Europe’s debt crisis will derail the global damped appetite for riskier assets.
South Africa’s currency retreated 0.9 percent to 8.2706 per dollar, the weakest since Oct. 20 at 11:32 a.m. in Johannesburg, extending last week’s 3.2 percent decline. Against the euro, the rand weakened 0.3 percent to 11.1082.
Emerging-market stocks fell for a fifth day, the longest losing streak since August, and the Standard & Poor’s GSCI index of 24 raw materials slumped to a three-week low. South Africa’s benchmark stock index dropped for a fourth day, led by commodity exporters including Anglo American Plc and BHP Billiton Ltd.
“Uncertainty in the U.S. and Europe could heighten the need to rotate away from riskier assets whose volatility is high and this may impact on South Africa,” Quinten Bertenshaw, a Johannesburg-based analyst at Tradition Analytics, wrote in e- mailed comment. “Poor management of the major developed economies is dealing a blow to local growth and inflation through the sustained weakness in the rand.”
A U.S. congressional committee is likely to announce today it failed to agree on deficit cuts, according to a Democratic aide who wasn’t authorized to discuss internal matters publicly and requested not to be identified. Italian bonds fell, sending yields higher, and Spain’s opposition won a parliamentary majority, making the ruling Socialists the fifth European government to be ejected amid the region’s debt crisis.
South African Bonds
South African bonds declined, driving 10-year yields to the highest in a week, ahead of the release of inflation data on Wednesday which may show consumer prices rising to near the upper end of the central bank’s 3 percent to 6 percent target range.
The yield on 6.75 percent securities due 2021 rose five basis points, or 0.05 percentage point, to 8.08 percent, the highest on a closing basis since Nov. 15.
South Africa’s consumer price index rose to 5.9 percent in October, from 5.7 percent the previous month, according to the median estimate of 18 economists in a Bloomberg survey.
“We think the risk to the inflation data is to the upside,” Rand Merchant Bank analysts led by Theuns de Wet said in a research note. “This combined with the potential for the rand to remain under pressure, should keep bond yields elevated.”
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
