The one-year securities, issued March 21, pay any gains in the rand with a minimum return of 10.05 percent as long as the currency doesn’t depreciate more than 15 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission. If the rand weakens more than that, investors suffer losses identical to the decline. JPMorgan Chase & Co. distributed the notes for a 1.1 percent fee.
The rand has dropped 8.4 percent this year to 9.2486 per dollar as of March 26 in New York. South Africa’s currency fell to a four-year low on March 20 after the head of the country’s central bank said depreciation was benefiting exporters, while the benchmark interest rate was left unchanged at 5 percent.
The rand is “overdue for a rebound,” said Michael Woolfolk, global markets strategist in New York at Bank of New York Mellon Corp. (BK) Projections for bigger increases in inflation and gross domestic product than in the U.S. could make the currency more valuable, he said.
Tiffany Galvin, a spokeswoman for Goldman Sachs in New York, declined to comment on the note.
Bloomberg started compiling comprehensive data on SEC- registered structured notes in January 2010.
Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.
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