Bloomberg News

Rand Falls to Two-Week Low, Yields Rise Amid Euro Debt Concern

January 06, 2012

Jan. 5 (Bloomberg) -- The rand depreciated to its lowest level in almost two weeks as stocks and commodities fell amid concern Europe will struggle to contain its debt crisis. Ten- year bond yields rose to a three-week high.

South Africa’s currency weakened as much as 1.3 percent to 8.2376, the lowest since Dec. 22. It traded 0.6 percent down at 8.1825 as of 3:10 p.m. in Johannesburg. The yield on 6.75 percent government bonds due 2021 rose five basis points, or 0.05 percentage point, to 8.14 percent, the highest on a closing basis since Dec. 19.

France sold 10-year bonds at an average yield of 3.29 percent, up from 3.18 percent in December, as credit ratings companies threaten to cut the nation’s AAA rating. The yield on Hungary’s one-year bills climbed to the highest level since 2009. Greek Prime Minister Lucas Papademos said yesterday deeper cuts in incomes and an agreement on international aid are the only way for the country to avert economic collapse and a “disorderly default.”

“News flow out of Europe remains volatile but mostly poor,” George Glynos, an economist at Johannesburg-based ETM Analytics, wrote in e-mailed comments today. The rand is “a passenger in a far bigger move driven once again by developments in the euro zone rather than anything local,” he added.

South Africa’s benchmark stock index dropped for the first time in three days, led by commodities exporters including Anglo American Plc and BHP Billiton Ltd. The euro, the currency of 30 percent of South Africa’s trade, fell to 11-year low against the yen and the weakest in 15 months versus the dollar.

France’s credit outlook was lowered by Fitch Ratings on Dec. 16 on the “heightened risk of contingent liabilities” from the escalating euro-region crisis. Standard & Poor’s is reviewing the top ratings of both France and Germany.

“We expect bonds to struggle in the opening weeks of the year,” Michael Grobler, a Cape Town-based analyst at Afrifocus Securities, said by e-mail. Bonds may rally if the Federal Reserve signals at its Jan. 25 meeting that it intends keeping interest rates low, he added.

--Editors: Ash Kumar, Stephen Kirkland

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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