Bloomberg News

Rand Drops to 5-Week Low as Metals Slump Dents Export Prospects

March 04, 2013

The rand declined for a third day, reaching its lowest level in almost five weeks, as commodity prices slumped, denting South Africa’s export prospects after the nation posted a record monthly trade shortfall last week.

The currency of Africa’s biggest economy slumped as much as 0.6 percent to 9.1175 per dollar, the weakest level since Jan. 29. It traded at 9.1162 as of 9:40 a.m. in Johannesburg, bringing its decline this year to 7 percent, the worst performance among emerging-market peers tracked by Bloomberg. Yields on benchmark 10.5 percent bonds due December 2026 were unchanged at 7.39 percent.

Commodity prices declined after China, the biggest buyer of South African raw materials, called for measures to cool property prices, curbing demand prospects for industrial metals. Commodities accounted for 53 percent of South Africa’s exports in 2012, according to government data.

“Looking at developments abroad where the weak growth environment is set to continue, demand for South African exports will remain tepid,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “The argument for more rand weakness in coming months remains intact.”

Standard & Poor’s GSCI Index of raw materials fell for a fifth day after the Chinese government called for higher down payments and interest rates for second-home mortgages in some cities, as well as stricter enforcement of taxes on sales. South Africa’s benchmark stock index declined for the first time in three days, led by mining companies including BHP Billiton Ltd. and Anglo American Plc.

South Africa’s trade gap reached 24.5 billion rand ($2.7 billion) last month compared with 2.7 billion rand in December, the Pretoria-based South African Revenue Service said on Feb. 28, more than the 9.7 billion rand median estimate of economists in a Bloomberg survey. Pressure on the current account, the broadest measure of trade in goods and services, is contributing to the rand’s slump to near a four-year low.

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

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net


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