Bloomberg News

Rand Set for Worst Quarter in 10 Years on Global Growth Concern

September 30, 2011

Sept. 30 (Bloomberg) -- The rand declined for a second day against the dollar, set for its worst quarter in 10 years, as declines in German retail sales, Chinese manufacturing and U.S. consumer spending signaled global growth is slowing.

The rand weakened as much as 3 percent to 8.1926 per dollar, and traded 2 percent down at 8.1164 as of 3:20 p.m. in Johannesburg. South Africa’s currency has depreciated 17 percent this quarter, the most since the three months to December 2001. It’s the worst performer in the quarter against the dollar among 16 major currencies tracked by Bloomberg.

Emerging-market stocks declined, the dollar and yen advanced against most major counterparts and gold rose as evidence of a global slowdown spurred investors to move money to havens. South Africa’s benchmark stock index dropped for a third day and bond yields rose to the highest since Sept. 26.

“The realization that global growth is slowing much quicker than expected, combined with financial-market stress, is adding to the risk aversion that is behind the rand’s weakness,” Nema Ramkhelawan-Bhana, a currency strategist at Rand Merchant Bank in Johannesburg, said by phone.

German retail sales slumped 2.9 percent in August from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest drop since May 2007. Consumer spending in the U.S. gained 0.2 percent in August after a 0.8 percent increase the previous month, while a gauge of Chinese manufacturing shrank for a third month, the longest contraction since 2009.

Data ‘Disappointing’

“Disappointing household spending data out of the U.S. and Germany, combined with dismal manufacturing data out of China, has inflamed fears about a global recession,” spurring investors to pull money out of emerging markets, Standard Bank Group Ltd. analysts led by Johannesburg-based Michael Keenan said in a research note.

Foreign investors were net sellers of 6.6 billion rand ($802 million) of South African bonds in the first four days of this week, more than in any other week since Jan. 14, according to JSE Ltd. data.

The rand stayed weaker after South Africa’s trade gap narrowed from a six-month high in August, and the Treasury reported that the budget deficit for the first five months of the fiscal year widened to 86.8 billion rand, from 78.2 billion rand in the same period a year ago.

Bonds fell for a second day on speculation the weaker rand will fuel inflation, crimping the central bank’s room to cut interest rates as the economy falters.

The 13.5 percent bonds due 2015 dropped 36 cents to 122.09 rand, driving the yield up nine basis points, or 0.09 percentage point, to 6.99 percent. The 6.75 percent securities due 2021 fell 62 cents to 89.85 rand, boosting the yield 10 basis points to 8.32 percent.

--Editors: Ana Monteiro, Vernon Wessels

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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