Bloomberg News

Rand Declines, Paring Best Month This Year, on Japan Yen Sales

November 01, 2011

Oct. 31 (Bloomberg) -- The rand weakened against the dollar, paring its biggest monthly advance this year, after Japan intervened in the market to weaken the yen, boosting the greenback and leading to a drop in commodity prices.

South Africa’s currency depreciated as much as 2.1 percent to 7.8846 per dollar, its biggest drop since Oct. 20, and traded 1 percent weaker at 7.7992 by 12:50 p.m. in Johannesburg. The rand has climbed 3.8 percent in October, heading for the biggest monthly increase since December, when it added 7 percent.

The yen slumped the most in three years against the dollar and the euro weakened after Japan stepped into foreign-exchange markets for the third time this year and pledged further sales to curb the currency’s advance. Copper declined, leading a drop in industrial metals. South Africa’s benchmark stock index fell, snapping a six-day winning streak.

“The big news this morning is the aggressive intervention from the Japanese authorities to combat yen strength,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, wrote in e-mailed comments. “This has reverberated through global markets, with the dollar moving stronger against all currencies, pushing the rand back to the 7.80s.”

The rand stayed weaker after credit growth slowed in September, adding to chances the central bank will keep its benchmark lending rate at a 30-year low next month to support economic growth.

The rate of expansion in lending to households and businesses fell to 5.5 percent, from 6.06 percent in August, the Pretoria-based Reserve Bank said today. The median estimate of 11 economists in a Bloomberg survey was 5.9 percent.

‘Continued Deterioration’

“Today’s data shows a continued deterioration in economic activity, which is negative for the rand from a growth differential perspective,” Tebogo Mosepele, a Johannesburg- based analyst at Standard Bank Group Ltd., wrote in e-mailed comments. “We maintain that the Reserve Bank will keep the repo rate on hold this year. However, we see an increased risk for a rate cut if the global and domestic economic outlook deteriorates.”

South Africa’s 6.75 percent securities due 2021 weakened for a second day, with the yield rising three basis points, or 0.03 percentage point, to 7.884 percent.

--Editors: Ana Monteiro, Wojciech Moskwa

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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