Dec. 7 (Bloomberg) -- The rand declined the most in two weeks against the dollar as concern European leaders will struggle to contain the region’s debt crisis damped demand for emerging-market currencies.
South Africa’s currency depreciated 0.9 percent weaker to 8.0971 at 4:45 p.m. in Johannesburg, the biggest drop on a closing basis since Nov. 23. Against the euro, it slipped 0.6 percent to 10.8158.
Germany rejects proposals to combine the current and permanent euro-area rescue funds, a government official said today in Berlin on condition of anonymity because the negotiations are private, a day before the beginning of a two- day European Union summit. Currencies from Russia, India and Brazil declined versus the dollar, while the euro weakened against 11 of its 16 major counterparts.
“There is a tremendous amount of uncertainty ahead of the EU summit,” George Glynos, managing director at Econometrix Treasury Management in Johannesburg, said by phone. “Some people in the market are putting a lot of faith in EU policy makers but their track record is shocking. They’ve disappointed the markets more than they’ve impressed.”
Standard & Poor’s warning this week on the debt ratings of 15 euro-area governments will spur leaders to ratchet up efforts tomorrow, German Finance Minister Wolfgang Schaeuble said yesterday. The European Central Bank is forecast to cut interest rates tomorrow.
“Cautious trade is typical ahead of major events - and we have two of these -- the ECB tomorrow and then the EU summit,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.
The rand stayed weaker after retail sales rose at a slower pace of 7.4 percent in October, compared with 7.7 percent the previous month, as a pickup in inflation undermined consumer spending.
South Africa’s 6.75 percent bonds due 2021 declined for a third day, driving the yield up three basis points, or 0.03 percentage point, to 7.91 percent.
--Editors: Stephen Kirkland, Linda Shen
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