Bloomberg News

Rand Declines as Germany Says No Quick Resolution to Debt Crisis

October 17, 2011

Oct. 17 (Bloomberg) -- The rand weakened against the dollar after German Chancellor Angela Merkel’s spokesman said Europe’s leaders won’t provide a quick resolution to the region’s debt crisis, sapping demand for riskier assets.

South Africa’s currency slumped 1.5 percent to 7.9379 per dollar by 3:40 p.m. in Johannesburg, after earlier gaining as much as 0.8 percent to an almost a three-week high, following last week’s biggest five-day advance since July.

The euro, the currency of a third of South Africa’s trade, declined and stocks reversed gains after Steffen Seibert, Merkel’s chief spokesman, said the search to end the crisis “surely extends well into next year.” His comments came after Group of 20 finance ministers and central banks endorsed parts of a plan to manage the debt crisis after weekend talks in Paris, sparking rallies in riskier assets including emerging- market currencies and stocks.

Seibert’s statement “basically killed the strong ‘wishful- thinking’ rally,” Benoit Anne, the London-based head of emerging-market strategy at Societe Generale SA, said by e-mail. “While we saw earlier a spectacular rally in high-beta emerging-market currencies, we have now retraced back into negative territory. The rand as usual tells us a good story.”

Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Seibert said at a news briefing today in Berlin, dashing optimism the crisis will be resolved soon.

South African bonds were little changed, with the yield on the 10.5 percent notes due 2026 rising less than one basis point to 8.40 percent.

--Editors: Ana Monteiro, Tim Farrand

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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