Rand Slips to Almost 5 1/2-Month Low on Egypt Crisis, Inflation

Feb. 11 (Bloomberg) -- South Africa’s rand slid to the weakest in almost 5 1/2 months against the dollar, set for a sixth weekly decline, as Egypt’s political crisis intensified and on concern global inflationary pressures are rising.

The rand depreciated as much as 1.2 percent to 7.3490 per dollar, the weakest intraday level since Sept. 1 and bringing its loss for the week to 0.8 percent. The currency traded 0.7 percent down at 7.3120 at 4:15 p.m. in Johannesburg, extending this year’s decline to 9.3 percent, the most among more than 20 emerging markets tracked by Bloomberg.

Egyptian President Hosni Mubarak defied calls for his immediate resignation late yesterday, agreeing only to delegate powers to his deputy, as thousands crammed into central Cairo demanding an end to his 30-year rule. South African President Jacob Zuma’s State of the Nation speech in Cape Town yesterday had little impact on the market, analysts said.

“Mounting global inflationary concerns and uncertainty surrounding the geopolitical tensions in Egypt have seen participants scale back on risky assets,” Michael Keenan, a Johannesburg-based currency strategist at Standard Bank Group Ltd., Africa’s biggest lender, wrote in a client note today. “There were no surprises in last night’s State of the Nation address, so we expect the rand to keep tracking international sentiment.”

Stocks fell from Asia to Europe after Egyptian President Mubarak’s refusal to step down following two weeks of protests hurt investor appetite for higher-yielding assets. Oil prices rose on concern the turmoil in Egypt will destabilize the Middle East, adding to concerns global inflation will rise.

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“We foresee that risk aversion will remain in place for the current trading session, which is why selling into rand strength with a target of 7.32 would be our preferred strategy into the weekend,” Keenan wrote.

South Africa’s government will implement a 39 billion-rand ($5.4 billion) job creation and tax incentive scheme to help ease the unemployment crisis in Africa’s biggest economy, President Zuma said last night. The country’s jobless rate eased to 24 percent in the final three months of last year, down from 25.3 percent in the third quarter, the government’s statistics office said Feb. 8.

Government bonds rose for the fourth day in five, with South Africa’s 13.5 percent security due September 2015 adding 4 cents to 121.40 rand. The yield declined 1 basis point to 7.85 percent.

Against the euro, the rand was little changed at 9.8913 for a fifth straight weekly loss of 0.8 percent.

To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net