BLBG:Rand Weakens For Third Day As Commodities Fall On Growth Concern
The rand fell to its lowest in three weeks and bonds dropped as European leaders prepared for a summit amid concern the debt crisis is threatening the global economy, damping demand for riskier assets.
South Africa’s currency depreciated as much as 1.5 percent to 8.5261 per dollar, the weakest intraday level since June 5, and traded 1.3 percent lower at 8.5049 by 5:35 p.m. in Johannesburg, declining for a third day. Yields on the nation’s 6.75 percent bonds due 2021 climbed five basis points, or 0.05 percentage point, to 7.39 percent.
German Chancellor Angela Merkel rejected joint euro-bloc bonds or bills, raising concern that European Union leaders may fail to tame financial turmoil at the June 28-29 summit. Italy and Spain prepare to sell debt tomorrow amid concern the fiscal crisis is infecting bigger economies. Citigroup said China’s economy may grow 7.8 percent this year, compared with a previous estimate of 8.1 percent, reflecting “anemic” domestic activity in the second quarter and further weakening of European demand.
“Concern over the future of the eurozone remains high,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “Sentiment looks set to remain shaky. We thus maintain our view that the rand retains its weakening bias in the short term.”
The euro dropped to $1.2535, the lowest in more than a week. The rand often tracks the euro, with a statistical correlation of 0.9 over the past month. A value of 1 would mean they moved in lock step. The euro area and China together buy a third of South Africa’s exports.
Emerging-market stocks fell to a two-week low and the Standard & Poor’s GSCI index of raw materials declined. Metals and other commodities account for 45 percent of South Africa’s exports. The nation’s benchmark stock index retreated for a third day in its longest losing streak since May 21.
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
