Rand Set for First Weekly Decline in Four as Commodities Tumble
The rand weakened, set for the first weekly decline in four, as commodity prices tumbled on concern that monetary policy tightening in China will curb demand from the biggest buyer of South African raw materials.
The currency of Africa’s largest economy fell the most among 24 emerging markets tracked by Bloomberg, while China’s one-month interbank rate surged the most since June amid concern authorities are curbing credit to cool inflation as growth accelerates. South Africa’s fiscal deficit and debt levels were “sustainable,” Finance Minister Pravin Gordhan said when releasing his mid-term budget two days ago.
Monetary tightening by China “weighed on local markets and saw bond yields retreat,” Thando Vokwana, a fixed-income trader at FirstRand Ltd. (FSR) in Johannesburg, said in an e-mailed note. “Consolidation may soon follow, with the rand seemingly losing steam.”
The rand depreciated 0.6 percent to 9.8116 per dollar as of 11:56 a.m. in Johannesburg, bringing its decline this week to 0.3 percent. Yields on benchmark 10.5 percent bonds due December 2026 climbed nine basis points, or 0.09 percentage point, to 7.86 percent for a gain of 11 basis points this week.
The Standard & Poor’s GSCI Index (SPGSCI) of raw materials fell for a fifth straight day as prices of metals including copper and platinum declined. Metals and other commodities accounted for 60 percent of South Africa’s exports in the first eight months of 2013, according to Treasury data. The nation has the world’s largest-known reserves of platinum and chrome and is the sixth-biggest gold producer.
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