BLBG:Rand Falls to One-Year Low Against Dollar as Commodities Tumble
The rand declined for a second day against the dollar, retreating to its weakest level in more than a year as commodity prices tumbled on concern Europe’s sovereign-debt crisis will dim global growth prospects.
The rand depreciated as much as 1.3 percent to 7.5896 per dollar, its weakest level since July 21, 2010. It traded down 0.9 percent as of 9:49 a.m. in Johannesburg. Against the euro, the rand slipped 0.4 percent to 10.3426.
Commodity prices fell to the lowest level in a week, led by decreases in copper and oil, after European policy makers failed to introduce a plan to stem the region’s sovereign-debt crisis and boost growth. South Africa’s benchmark stock index snapped a four-day winning streak as raw materials producers including BHP Billiton Ltd. and Anglo American Plc dropped.
“The rand looks quite vulnerable going forward, considering that it is tied up to the outlook for commodities,” Benoit Anne and Salomon Guillaume, London-based analysts at Societe Generale SA, wrote in e-mailed comments.
The euro, the currency of 45 percent of South Africa’s exports, slid against the dollar and yen before European Union and International Monetary Fund inspectors speak today with Greek Finance Minister Evangelos Venizelos to judge whether the government is eligible for its next aid payment due next month.
The rand’s decline came after the European Central Bank last week said it will lend dollars to the region’s banks as the sovereign-debt crisis fueled concern lenders are facing financing problems, prompting investors to sell riskier, emerging-market assets.
Currency Depreciation
“With banks doubting each others’ solvency, we are at risk of money markets freezing up and so an unwinding of leveraged plays,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. “Leveraged assets such as the rand are in for a rough ride.”
South Africa’s currency may depreciate to 8 per dollar by mid-week, Cairns and Ramkhelawan-Bhana wrote.
Bonds slumped before data on Sept. 21 that may show inflation in Africa’s largest economy accelerated in August, and on speculation the central bank will leave its benchmark interest rate unchanged.
The consumer price index likely rose 5.5 percent, from 5.3 percent in July, according to the median estimate of 19 economists in a Bloomberg survey. The Reserve Bank’s Monetary Policy Committee will keep its benchmark interest on hold at 5.5 percent, according to all 12 economists surveyed by Bloomberg.
The 13.5 percent bonds due 2015 dropped 54 cents to 122.50 rand, driving the yield up 13 basis points, or 0.13 basis point, to 6.936 percent.
Bonds may “come under some marginal pressure leading up to the MPV announcement,” 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
