The rand declined versus the dollar on concern that debt burdens in the U.S. and Europe will curb global economic growth, while strikes by steel and energy workers helped damp demand for the South African currency.
The rand weakened as much as 0.9 percent to 6.8821 per dollar, and traded 0.6 percent down at 6.8602 as of 4:32 p.m. in Johannesburg, the worst performance out of more than 20 emerging-market currencies monitored by Bloomberg. The South African currency slid 0.9 percent to 9.7380 per euro.
Moody’s Investors Service said it may cut America’s credit rating amid concern political deadlock will lead to a U.S. debt default, while Italian borrowing costs rose to e three-year high at a sale of five-year debt today. In South Africa, some gas stations ran dry as a strike of energy workers entered its fourth day.
“There is a lot of nervousness around the debt situation, and the rand is living up to its high-beta status,” Michael Keenan, an analyst at Standard Bank Group Ltd., Africa’s biggest rand trader, said by phone from Johannesburg. “If we add to that the domestic strikes, they become a catalyst for rand weakness.”
The three-month implied volatility, a measure of that tends to rise in bear markets, of the rand versus the dollar rose 11 basis points today to 15.1 percent, indicating investors see wider price swings in coming weeks. The gauge has climbed from 14.01 percent a week ago.
At least 150 gas stations in Gauteng, South Africa’s most populous province, ran out of fuel today, the Fuel Retailers Association said. A strike of steel and engineering workers continued for an 11th day, sparking concern loss of output will stall the nation’s economic recovery. The rand declined against all 16 of its most-traded peers, according to data compiled by Bloomberg.
“We are becoming concerned about ongoing strikes and pay disputes but not because of growing inflationary expectations but through the prism of sustainability of first signs of recovery in economic activity,” BNP Paribas SA analysts led by London-based Paul Mortimer-Lee wrote in an e-mailed research note. “If the situation continues to deteriorate, we may well see some more pronounced impact on the rand.”
South African companies took advantage of the rand’s rally yesterday and in early trading today to buy dollars to pay for imports, said Chris Becker, a Johannesburg-based analyst at Econometrix Treasury Management, which advises companies on currency transactions. The rand gained 0.8 percent yesterday, snapping three days of losses, and rose as high as 6.7831 before reversing its gain early today.
“There were big corporate flows from oil companies buying dollars,” Becker said by phone, without naming the companies.
Bonds gained for a second day as investors increased bets the central bank won’t raise interest rates this year to cool inflation driven by higher fuel and food prices. Morgan Stanley yesterday reduced its inflation forecasts for South Africa and said the central bank will delay a rate increase at least until the first quarter of 2012.
Forward-rate agreements starting in January dropped three basis points today to 5.82 percent. The rate has declined from as high as 6.1 percent a month ago.
The 13.5 percent notes due 2015 rose 9 cents to 121.11 rand, driving the yield down three basis points to 7.48 percent. The 6.75 percent securities due 2021 climbed 5 cents to 89.03 rand, reducing the yield one basis point to 8.43 percent.