Bloomberg News

Rand Declines for 2nd Day Amid Signs Global Recovery Faltering

January 26, 2012

Jan. 25 (Bloomberg) -- The rand declined for a second day, retreating from a two-month high against the dollar, after a report showed the U.K. economy contracted more than estimated, adding to signs the global recovery is faltering.

South Africa’s currency traded 0.6 percent weaker at 7.9840 per dollar as of 1:10 p.m. in Johannesburg, after earlier trading up 0.5 percent. It declined less than 0.1 percent against the euro to 10.3525.

Standard & Poor’s GSCI Index of raw material prices declined for a second day and South Africa’s benchmark stock index dropped after the International Monetary Fund yesterday cut its forecast for global growth and warned that the European debt crisis threatens to derail the world economy. The U.K. economy shrank 0.2 percent in the fourth quarter, leaving Britain on the brink of another recession.

“People were thinking the recovery has started, but they’re coming to the rude awakening that we’re not out of the woods by a long way,” Ion de Vleeschauwer, chief dealer at Johannesburg-based Bidvest Bank Ltd., which runs South Africa’s largest chain of money changers, said by phone. “There is still a lot of uncertainty around.”

Earlier, the rand reached 7.8965 per dollar, its strongest level since Nov. 14. Demand for rand at around 7.90 per dollar, a so-called resistance level, sparked the currency’s initial retreat, De Vleeschauwer said. A resistance level is a price level where a security is expected to receive sell orders.

South Africa’s 13.5 percent bonds due 2015 declined for the first day in three, driving the yield up two basis points to 6.66 percent.

--Editors: Peter Branton, James Kraus

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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