Bloomberg News

Rand Retreats on China Rate Rise, Portugal Downgrade Concern

July 06, 2011

July 6 (Bloomberg) -- The rand weakened for a second day against the dollar on speculation Portugal may need to follow Greece in seeking a second financial bailout and as a Chinese interest-rate increase and slower American service-industry growth dimmed the global economic outlook.

The currency of Africa’s biggest economy declined as much as 0.8 percent to 6.7819 per dollar and traded 0.6 percent weaker at 6.7703 as of 4:24 p.m. in Johannesburg. The rand strengthened for a fifth day against the euro, gaining 0.7 percent to 9.6743.

Moody’s Investors Service cut Portugal’s credit rating to junk yesterday, pushing up the extra yield investors demand to hold the country’s 10-year bonds over German bunds by 148 basis points, or 1.48 percentage point, to a euro-era record. China increased lending and deposit rates by 25 basis points effective tomorrow. The U.S. Institute for Supply Management’s index of non-manufacturing industries was lower than analysts projected.

“The scales, have tilted back towards a weaker rather than stronger rand” as “the markets will now start to shift more towards a risk-off environment,” Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw wrote in a research note.

Government 13.5 percent notes due 2015 gained 7 cents to 121.286 rand, driving the yield down by three basis points to 7.460 percent. The 6.75 percent securities due 2021 advanced for a third day, gaining 34 cents to 89.391 rand, pushing the yield down five basis points to 8.363 percent.

--Editors: John Kohut, Linda Shen.

To contact the reporter on this story: Chris Kay in London at

To contact the editor responsible for this story: Gavin Serkin at

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