Rand Falls for Second Day as Cyprus Bailout Sparks Risk Aversion

The rand weakened for a second day as stocks and commodities slumped after an unprecedented levy on Cyprus’ bank savings threatened to spark a new round in Europe’s debt crisis, prompting investors to sell riskier assets.

South Africa’s currency slipped as much as 0.8 percent before paring its loss to 0.5 percent at 9.2284 per dollar by 9:14 a.m. in Johannesburg. The rand depreciated 1 percent last week. Yields on benchmark 10.5 percent bonds due December 2026 climbed three basis points, or 0.03 percentage point, to 7.43 percent.

The 17-nation euro declined by the most in three weeks against the yen as investors sought haven assets after Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. The euro area is South Africa’s biggest regional trading partner.

“The rand is under renewed pressure as the euro tumbles after the Cyprus bailout,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. South Africa’s currency could weaken as far as 9.28 per dollar, he added.

Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member currency bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt.

Emerging-market stocks slumped the most in more than three months and Standard & Poor’s GSCI Index of raw materials tumbled more than 1 percent. South Africa’s benchmark stock index fell to a two-week low, led by declines in shares of commodity exporters including BHP Billiton Ltd. (BHP) and Anglo American Plc. (AAL)

Mining and commodities accounted for 53 percent of South Africa’s exports in 2012, 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: Vernon Wessels at vwessels@bloomberg.net

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