The rand depreciated the most against the dollar in two weeks after commodity prices dropped for a second day, damping demand for South Africa’s metal exports and shares in the country’s mining companies.
The rand weakened as much as 1.3 percent to 6.6658 per dollar, and traded 0.7 percent down at 6.6251 per dollar at 5 p.m. in Johannesburg, its biggest intraday decline since April 18. The South African currency slipped 0.5 percent to 9.8324 per euro.
Copper dropped to a two-week low after data showed manufacturing in China and the U.S. expanded at slower rates. Gold, which along with platinum accounts for one-fifth of South Africa’s exports, also fell. South Africa’s benchmark stock index slid, led by mining companies including Anglo American Plc and Impala Platinum Holdings Ltd.
“The bias has shifted in favor of a weaker rand this morning,” Michael Keenan, a Johannesburg-based analyst at Standard Bank Group Ltd., said in an e-mailed research note. “Dollar weakness has abated, precious metals are softer and Wall Street finished down yesterday.”
The rand’s decline comes after the currency advanced to 6.5437 per dollar yesterday, its strongest level since November 2007. Yesterday was a public holiday in South Africa, depressing trading in the currency, Keenan wrote.
South African 10-year government bonds gained, driving the yield to the lowest in more than three weeks, amid signs a weak economic recovery may allow the central bank to hold borrowing costs at a 30-year low this year.
The 6.75 percent securities due 2021 climbed 30 cents to 88.38 rand. The yield fell five basis points, or 0.05 percentage point, to 8.46 percent, the lowest since April 8 on a closing basis.
Money supply and credit growth in Africa’s biggest economy unexpectedly slowed in March, the Reserve Bank said on April 29. The purchasing managers’ index fell in April, Kagiso Securities Ltd. said today, indicating a weak recovery in manufacturing, while the jobless rate increased to 25 percent in the first quarter, according to the Pretoria-based government statistics agency.
The data indicates that “domestic demand is still weak and rate hikes are not an option at this juncture,” BNP Paribas analysts led by London-based Paul Mortimer-Lee said in an e-mailed research note before the bond auction. Lower interest rates boost the returns of fixed-interest bonds relative to cash.
The Reserve Bank today sold 1.3 billion rand ($196.3 million) of 8 percent securities maturing in 2018 at an average yield of 8.38 percent at its weekly auction, the lowest yield since the auction on Jan. 14. Investors bid for 1.91 times the amount on offer, the Pretoria-based central bank said on its Bloomberg page. The bank also auctioned 800 million rand of 10.5 percent notes due 2026 at an average yield of 8.67 percent, the lowest since the auction on Feb. 18, with investors bidding for 4.09 times the amount on offer.