Rand Snaps Seven-Day Winning Streak as Current Account Gap Grows

The rand weakened, snapping a seven- day winning streak, and yields rose after South Africa posted its biggest current-account deficit in three years in the first quarter as demand slumped for the nation’s exports.

South Africa’s currency depreciated 0.9 percent to 8.2710 per dollar as of 3:54 p.m. in Johannesburg. Yields on the nation’s 6.75 percent bonds due 2021 climbed four basis points, or 0.04 percentage point, to 7.42 percent.

The current account shortfall, the broadest measure of trade in goods and services, widened to 4.9 percent of gross domestic product from 3.6 percent in the previous three months, the South African Reserve Bank said in its Quarterly Bulletin. The median estimate of 13 economists surveyed by Bloomberg was for a shortfall of 4.5 percent.

“It is a concern, and it will in due course have a rand impact,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., said by phone. “It has put a floor on rand appreciation for now.”

The rand gained 5.4 percent against the dollar in the first quarter, the second-best performer of the 16 major currencies tracked by Bloomberg. That’s hurt export earnings at the same time that a debt crisis in Europe curbed demand from a region that buys about a third of South African manufactured goods. The rand has plunged 7 percent against the dollar since the beginning of April.

The rand also weakened today as stocks and commodity prices fell after the U.S. Federal Reserve cut growth estimates and a report showed China’s manufacturing may shrink for an eighth month.

China PMI

Fed officials cut their estimate for economic growth in 2012 to between 1.9 percent and 2.4 percent, and extended stimulus known as Operation Twist. A preliminary reading of a purchasing managers’ index by HSBC Holdings Plc and Markit Economics shows China’s PMI may shrink in June, matching the streak of contractions during the global financial crisis.

“Risk appetite seems to have softened” after the Fed statement “disappointed”, Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “This has been compounded by a further decline in the HSBC China PMI.”

Emerging-market stocks declined, with the benchmark index falling for the first time in five days. The Standard & Poor’s GSCI Index of raw materials dropped for a second day as the prices of metals including copper and nickel fell. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.

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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