BLBG:Rand, South African Bonds Weaken as European Debt Concern Cuts Commodities
The rand weakened for a second day against the dollar as commodity prices slumped on concern that demand for raw materials may ease as the euro-zone debt crisis remains unsettled. Bonds headed for the lowest level in a month.
The currency of Africa’s biggest economy depreciated as much as 1.8 percent to 7.4337 per dollar and traded 1 percent weaker at 7.3852 as of 10:02 a.m. in Johannesburg. Bonds declined for a fourth day, driving four-year yields to the highest since Aug. 15. The 13.5 percent notes due 2015 dropped 39 cents to 122.52 rand, raising the yield 8.9 basis points, or 0.089 percentage point, to 6.939 percent.
Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today amid increasing speculation that Greece will default. Commodities gauged by the S&P GSCI Index pared this year’s gain to 3.8 percent, weighed down by investors’ concerns about the slowing U.S. and European economies.
“The dollar-rand is open to large upside moves as political backbiting between euro-zone policy makers and setbacks in deploying the second bailout package to Greece raise concerns of an imminent Greek default, exerting downside pressure on the euro-dollar,” John Cairns and Nema Ramkhelawan- Bhana, currency strategists at Rand Merchant Bank in Johannesburg, wrote in a research note.
The Manila-based Asian Development Bank cut its growth forecasts for the region excluding Japan today and raised the area’s inflation estimate to 5.8 percent this year, from a previous forecast of 5.3 percent, saying price increases will put pressure on policy makers to raise rates even as a faltering global recovery curbs growth.
China, the top user of copper, energy and grains, raised interest rates for the third time this year in July to combat rising consumer prices.
South Africa’s 6.75 percent securities due 2021 fell 33 cents to 91.03 rand, boosting the yield 5.5 basis points to 8.117 percent.
To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
