The rand was set for its third weekly loss versus the dollar on bets slowing global growth will sap demand for South Africa’s exports and as investors exit riskier assets on concern Europe’s debt crisis will worsen. The rand declined as much as 0.7 percent to 7.2669 per dollar, and traded 0.1 percent down at 7.2216 as of 10:24 a.m. in Johannesburg. South Africa’s currency has weakened 0.6 percent this week, bringing its decline in the past three weeks to 7.3 percent. It added 0.1 percent to 10.3204 per euro for a decline this week of 0.8 percent. Emerging-market stocks fell for a second day, prices of industrial metals slumped and gold soared to a record. South Africa’s benchmark stock index headed for its biggest two-day fall since April 2009, dragged down by losses for mining companies including Anglo American Plc and BHP Billiton Ltd., while bonds surged, driving 10-year yields to the lowest in more than two years. “Risk aversion has come roaring back as a result of a combination of euro-zone bank stress and poor U.S. economic data,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, wrote in a research note. “Expect nervous trade throughout the day.” The rand may decline to a trading range of 7.40 to 7.60 per dollar if global stocks extend losses, Cairns and Ramkhelawan- Bhana wrote. The likelihood of the rand trading at 7.40 per dollar by the end of this quarter is 69 percent, implied volatility from options contracts monitored by Bloomberg showed. Economic Data Reports yesterday showed U.S. home sales unexpectedly dropped and a gauge of Philadelphia manufacturing shrank more than estimated, heightening concern that the world is heading for a second recession. Morgan Stanley analysts cut their forecasts for global economic growth. Slower growth would damp demand for raw materials including copper and iron ore, cutting profits for South African exporters. “Higher than expected inflation data, meanwhile, reduces the scope for further quantitative easing from the Fed,” Cairns and Ramkhelawan-Bhana wrote. “People are starting to talk of a double-dip as the core view rather than as the risk view.” The rand’s decline was fueled by concern among investors that Europe’s debt problems may result in a liquidity crisis for banks, reducing foreign-investor flows into South Africa’s bond and stock markets, the analysts wrote. “Until the ECB does take more dramatic action, we are going to be sitting with short term liquidity risk in the core economies and this means the short term tactical risks lie in favor of rand weakness,” Tradition Analytics strategists led by Johannesburg-based Quinten Bertenshaw wrote in a research note. 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

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