Oct. 25 (Bloomberg) -- The rand weakened, snapping two days of gains, as the European Union prepares for tomorrow’s summit to discuss ways to contain the region’s debt crisis.
The rand slumped 0.5 percent to 7.9085 per dollar by 12:35 p.m. in Johannesburg, compared with a 2.1 percent gain yesterday. South Africa’s rand has plunged 16 percent so far this year, making it the worst performer among more than 20 emerging-market currencies tracked by Bloomberg.
Banks are pushing back against European leaders on the size of losses they are ready to accept on Greek bonds as officials struggle to rescue the debt-laden country while avoiding a default. Officials, who will hold the second summit in four days tomorrow, are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading.
The rand will come under pressure, according to economists at the Johannesburg-based Standard Bank Group Ltd., including Michael Keenan and Shireen Darmalingam, who said they “remain skeptical of a silver bullet” would be delivered this week on the European debt situation. Any solution would also come at the expense of European growth, the economists said in an e-mailed note to clients dated today.
“This would hinder the rand from an export perspective,” they said. “The currency would also take strain from the risk aversion that would accompany a severe European economic downturn.”
--Editors: Ana Monteiro, Linda Shen
To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at firstname.lastname@example.org
To contact the editor responsible for this story: Kenneth Wong at email@example.com