WS: Rand Weakens on Recovery Concern; Japan's NTT in Didata Buyout
The rand weakened 0.4 percent to 7.5581 per dollar by 1:36 p.m. in Johannesburg, from a previous close of 7.5310. Earlier the rand declined as much as 0.7 percent to 7.5841.
Emerging-market stocks slumped after the Federal Reserve cut its growth forecast and China's economic expansion slowed, reducing investors' appetite for risk. About half of Nippon Telegraph & Telephone Corp.'s offer for Dimension Data Plc will flow to South Africa when the deal concludes in October, Brett Dawson, chief executive officer of Didata, said on a conference call with reporters today.
"People still aren't convinced about strength of the global recovery so risk is coming off the table," said Ian Martin, a currency strategist at Rand Merchant Bank in Johannesburg. The Didata deal "is generally rand-positive but the market is waiting for more detail on exactly how the deal is structured," he said. "If the inflows are smoothed out over time it could have a limited impact on the currency."
Fed officials trimmed their forecasts for growth and noted that risks to the recovery had increased though they see no need to boost stimulus to the economy, minutes of their June meeting showed late yesterday. Economic growth in China, the world's fastest-growing major economy, slowed to 10.3 percent in the second quarter, from 11.9 percent in the first three months of the year, signaling a deeper second-half slowdown.
The rand slipped versus all 16 most-actively traded currencies monitored by Bloomberg, losing most against the Swiss franc. Against the euro, the rand depreciated 0.8 percent to 9.6838 while it weakened 1 percent versus the pound to 11.6113.
Government bonds fell in South Africa for a second day, with the benchmark 13.5 percent security due September 2015 falling 8 cents to 124.05 rand. The yield on the bond rose 1 basis point to 7.74 percent.
Investors added to bets that South Africa's central bank may lower its 6.5 percent benchmark interest rate when it next meets on July 22, forward-rate agreements show. The cost of three-month contracts for cash in one month fell 2 basis points to 6.42 percent.
South Africa's National Treasury bought an estimated $2.2 billion of foreign currency this year to boost reserves, limiting gains in the rand during the nation's hosting of the soccer World Cup, Citigroup Inc. said in a research note. The foreign-exchange purchases included $700 million in June, according to the note, which was based on data published by the central bank.
