Rand Slumps to Week-Low as Central Bank Lowers Growth Estimate

The rand fell to its lowest level in a week as stocks and metal prices tumbled after reports signaled economies in Europe and Asia are slowing, fueling concern South Africa’s export prospects will deteriorate.

The rand retreated as much as 1.3 percent to 8.3835 per dollar, the weakest since Sept. 13, before paring its decline after South Africa’s central bank left its benchmark lending rate unchanged. It traded 0.7 percent lower at 8.3301 as of 4:48 p.m. in Johannesburg. Yields on 6.75 percent bonds due 2021 rose for the first time in four days, adding four basis points, or 0.04 percentage point, to 6.68 percent.

The South African Reserve Bank today revised its growth forecasts down, saying it is concerned about global risks to the domestic economy. Euro-area services and manufacturing output fell to a 39-month low in September and China’s manufacturing probably contracted for an 11th month, according to data from Markit Economics and HSBC Holdings Plc. Japan’s exports slid for a third month in August, the Finance Ministry said. More Americans than forecast filed applications for unemployment benefits last week, the Labor Department said.

“There is no way our exports are going to pick up if the world’s leading economies are in decline,” Ian Cruickshanks, head of strategic research at Nedbank Group Ltd. (NED) in Johannesburg, said by phone. “That is quite worrying for the outlook for the rand exchange rate.”

The Standard & Poor’s GSCI index of raw materials declined for a fourth day to the lowest since Aug. 13 as the prices of metals including copper, nickel and platinum fell. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.

The South African Reserve Bank’s Monetary Policy Committee left its benchmark interest rate unchanged at 5 percent today as rising food and fuel costs limited room to stimulate growth. The central bank said today South Africa’s economy will probably expand 2.6 percent this year, compared with an earlier estimate of 2.7 percent.

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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