Rand Falls to Two-Year Low Versus Yen as Japan Closures Dims Metal Outlook

The rand slumped to its lowest in almost two years against the yen as factory closures in Japan damped the outlook for South Africa’s metal exports.

South Africa’s currency declined as much as 5.5 percent to 10.6905 yen per rand, the weakest intraday level since April 15, 2009, and traded 1.7 percent lower at 11.1210 at 4:46 p.m. in Johannesburg, bringing its decline this week to 6.6 percent. Against the euro, the rand traded down 1 percent at 9.9274, a fifth day of losses, while it declined 0.3 percent to 7.0995 versus the dollar after a drop of 2.2 percent earlier today.

Carmakers including Daihatsu Motor Co. and Toyota Motor Corp. have closed plants in Japan as the nuclear crisis disrupts electricity supplies, reducing demand for platinum-group metals that are used in car exhaust systems. Platinum, which accounts for 52 percent of South Africa’s exports to Japan, according to the government, has declined 4.8 percent this week.

“Japan’s motor industry has ground to a halt,” Michael Keenan, a Johannesburg-based analyst at Standard Bank Group Ltd., Africa’s largest rand trader, wrote in an e-mailed research note. “In the short term, global growth and Japan’s demand for South Africa’s exports are likely to suffer” until Japan starts rebuilding its economy, he said.

The yen strengthened to a post-World War II high as Group of Seven officials prepare to meet to discuss the threat to the world’s third-largest economy from last week’s earthquake and a worsening nuclear crisis. Nomura Holdings Inc., Japan’s biggest brokerage, today cut its economic growth forecast for the country this year and Morgan Stanley Asia Chairman Stephen Roach said that the aftermath of the earthquake threatens to cause a relapse in the global recovery.

‘Bearish’

Japan accounts for 8 percent of South Africa’s exports and is the country’s third-biggest export destination, according to Department of Trade and Industry data.

“We see scope for further rand weakness in the near term,” Keenan wrote. “We are especially bearish about the rand in relation to the yen.”

The rand also weakened on speculation that Japanese investors may repatriate money invested overseas, including rand assets, to fund rebuilding at home. Japanese investors own about $3.9 billion of rand-based Eurobonds, known as uridashi, according to data compiled by Bloomberg.

“The fear of the repatriation of Japanese funds invested overseas, and particularly those invested in the form of uridashi, is behind” some of the rand’s decline, analysts led by David Bloom, London-based global head of currency strategy at HSBC Holdings Plc, said in an e-mailed research note. “The dependence on short-term capital flows makes the rand particularly vulnerable in the current context.”

South African government bonds fell for a second day. The 13.5 percent security due Sept. 2015 dropped 30 cents to 120.753, driving the yield 7 basis points higher to 7.915 percent.

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

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

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