Oct. 15 (Bloomberg) -- South Africa's rand snapped a two-day gain against the dollar and the euro amid speculation the $2 trillion pumped into the world's banks won't be enough to avert a global recession.

Stocks slumped around the world on concern weakening economic growth will hurt company earnings and curb demand for South Africa's commodities. U.S. retail sales fell the most in three years last month as mounting job losses in the world's biggest economy cut consumer demand. Federal Reserve Bank of San Francisco President Janet Yellen said yesterday the U.S. may already be in a recession.

``In the context of a slowing domestic economy, a global recession will be a double whammy for South Africa,'' said Roderick Ngotho, a currency strategist in London for Europe, the Middle East and Africa at UBS AG, the world's second-biggest currency trader. ``South Africa's export prospects will be severely compromised by a slowing global economy and that's not constructive for currency strength.''

The rand weakened as much as 17.8 percent to 10.7450 per dollar, and traded at 10.6187 at 4:37 p.m. in New York, from 9.1190 yesterday. It slipped versus the 16 most-actively traded currencies monitored by Bloomberg, losing 11 percent to 13.9509 per euro.

The prospect of a global slump is hurting emerging-market currencies from Brazil to Indonesia irrespective of attempts by the biggest economies to end the credit crisis with an unprecedented bank bailout. The IMF's World Economic Outlook last week forecast that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007. That would mean a recession under the fund's informal definition.

`Weaker Commodity Prices'

``The rand is reacting to the outside sentiment that a global recession may be hot on the heels of the crisis in financial markets,'' said Jim Bryson, head of foreign-exchange trading at Rand Merchant Bank in Johannesburg. ``A global recession would imply weaker commodity prices and that would imply lower export revenue for a commodity-backed economy like South Africa's.''

The Reuters/Jefferies CRB Index of 19 commodities fell 4.5 percent, extending its decline in the past three months to 37 percent. Commodities account for more than half of South Africa's export earnings, data from the Department of Minerals and Energy show.

Weakening Stocks

South Africa's FTSE/JSE Africa All Share Index tumbled 7 percent, snapping a two-day advance, as stocks around the world fell. The MSCI World Index of equities lost 7.1 percent and Europe's benchmark Dow Jones Stoxx 600 Index slipped 6.5 percent. The Standard & Poor's 500 Index slumped 9 percent in New York.

Investors should ``hedge against further rand weakness versus the dollar, euro and yen,'' Ngotho said.

Economic growth in the U.S. and the 15-nation euro-region economy will slow to 0.3 percent next year, according to UBS. About 25 percent of South Africa's total exports go to the euro region and about 12 percent to the U.S., according to data compiled by the Zurich-based bank.

``Our economists are forecasting a global recession that will be led by a slowdown in the U.S. and Europe,'' Ngotho said.

Sales at U.S. retailers fell more than forecast in September, losing 1.2 percent, the Commerce Department said in Washington today.

Government bonds were mixed. The yield on the benchmark 13.5 percent security due September 2015 rose 2 basis points to 9.01 percent. The yield on the 13 percent note maturing in August 2010 slipped 4 basis points to 9.17 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

Last Updated: October 15, 2008 16:39 EDT