BLBG:Rand Falls for First Day in Three Versus Dollar on Fears of Debt Contagion
The rand declined for the first time in three days on speculation European efforts to contain the debt crisis won’t halt contagion, and after Standard & Poor’s cut the credit ratings of some of the world’s biggest banks.
South Africa’s currency fell as much as 1.3 percent, and traded 0.5 percent weaker at 8.3957 per dollar as of 10:51 a.m. in Johannesburg, bringing its decline this month to 8.7 percent. Against the euro, it slipped 0.1 percent to 11.1486.
The euro extended its slide against the dollar this month to 4 percent after euro-area finance ministers approved enhancements to the European Financial Stability Facility, while backing off setting a target for its firepower and seeking a greater role for the International Monetary Fund. The rand often moves in tandem with the euro, the currency of a third of South Africa’s trade.
“We are seeing emerging-market currencies under pressure as the euro is on the slide,” Benoit Anne, the London-based head of emerging-market strategy at Societe Generale SA, said by e-mail. “The usual high-beta currencies are leading the way,” including the rand.
S&P’s downgrade of some of the world’s biggest lenders may pressure firms already grappling with slower economic growth and Europe’s mounting debt crisis. The ratings company cut the ratings of banks including Goldman Sachs Group Inc., Bank of America Corp. and UBS AG. Lenders may have to post billions of dollars of additional collateral as a result of the downgrades.
“Whilst all these risks abound, the credit crunch that has impacted so negatively on emerging-market currencies is unlikely to dissipate any time soon,” Quinten Bertenshaw, a Johannesburg-based analyst at Tradition Analytics, and colleagues wrote in e-mailed comments.
Stocks
South Africa’s benchmark stock index dropped for a second day, led by miners including BHP Billiton Plc, as the prices of metals and other commodities declined. The Standard & Poor’s GSCI gauge of 24 commodities fell for the first day in three.
South Africa’s 6.75 percent bonds due 2021 weakened, snapping four days of gains. The yield rose six basis points, or 0.06 percentage point, to 7.02 percent.
South Africa will probably report a trade deficit of 2 billion rand ($238 million) for October, according to the median estimate of 11 economists in a Bloomberg survey. That compares with a surplus of 2.5 billion rand a month earlier. The South African Revenue Service, based in Pretoria is set to release the data at 2 p.m.
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
