Bloomberg News

Rand Slumps to 2 1/2-Year Low Amid Signs Global Growth Stalling

November 24, 2011

Nov. 23 (Bloomberg) -- The rand fell to its lowest in 2 1/2 years after U.S. durable-goods orders declined in October and Germany failed to raise its target amount in a bond sale, prompting investors to sell riskier, emerging-market assets.

South Africa’s currency declined for a third day, losing as much as 1.4 percent to 8.4941 per dollar, the weakest level since May 20, 2009. The rand traded 1.1 percent weaker at 8.4659 as of 4:38 p.m. in Johannesburg. Against the euro, it declined 0.2 percent to 11.3455.

Orders for U.S. durable goods fell in October as demand for aircraft and business equipment cooled, indicating a slowing global economy may temper purchases. A gauge of European services and manufacturing shrank for a third month, and data showed China’s manufacturing may contract this month by the most since March 2009. Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, sending its borrowing costs higher and prompting investors to pull money out of riskier emerging markets on concern the euro-region’s debt crisis will worsen.

“It will always raise risk aversion if there are signs the crisis is starting to spread to core countries in the euro region,” Nomvuyo Guma, a Johannesburg-based currency strategist at Standard Bank Group Ltd., said by phone. “The dominant factors driving the rand remain global.”

‘Negative Impact’

The U.S. economy grew less than estimated last quarter, data yesterday showed. South Africa’s benchmark stock index fell to the lowest in more than a month as shares of commodity exporters including Anglo American Plc and BHP Billiton Ltd. tumbled. Metals and other raw materials account for about 45 percent of South Africa’s export earnings, according to South African Revenue Service data.

“The negative impact of the downward revision in U.S. growth was further compounded by a weak manufacturing report out of China,” John Cairns, a Johannesburg-based analyst at Rand Merchant Bank, said in e-mailed comments. “We expect the rand to remain under pressure today.”

Bonds fell for a third day, with the yield on 6.75 percent securities due 2021 rising three basis points, or 0.03 percentage point, to 8.25 percent.

--Editors: Linda Shen, Thomas Mulier

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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