The rand declined the most in more than five weeks as the prospect of a Greek referendum on a European Union bailout and a slowdown in Chinese manufacturing sapped demand for riskier, emerging-market assets.
South Africa’s currency retreated 4 percent to 8.1945 per dollar at 2:53 p.m. in Johannesburg, after declining as much as 4.2 percent earlier, the most in one day since Sept. 22. Against the euro, the rand slumped 1.5 percent to 11.1551.
Greek Prime Minister George Papandreou’s decision to put economic reforms tied to the EU bailout to a referendum rekindled concern the nation may default on its sovereign debt. China’s Purchasing Managers’ Index fell in October to the lowest level since February 2009, a sign the economy of the biggest buyer of South African raw materials is cooling.
“The news overnight of the Greek referendum sent markets into a spin, and the rand has been under pressure,” Chris Becker, an analyst at Johannesburg-based Econometrix Treasury Management, which advises corporate clients on currency and bond transactions, said by phone. “The news out of China is also quite bearish.”
Dollar-selling by exporters will likely cap the rand’s decline at between 8.20 and 8.30 per dollar, with 8.20 per dollar seen as a significant support level for the currency, Becker said. Support levels are where traders cluster orders to buy a currency.
Papandreou’s call for a referendum and a parliamentary confidence vote raised the prospect of derailing the European bailout effort and pushing Greece into default. An opinion poll published Oct. 29 showed most Greeks believe the accord on a new bailout package and a debt writedown is negative. Group of 20 leaders gather for a Nov. 3-4 summit in Cannes, France, to discuss the debt crisis.
“Risk appetite has unwound quickly,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, wrote in a research note. The Greek referendum “undoes all the good work from last week’s euro zone summit. What happens if voters say no? We’ve been thrown back into another period of wait and see.”
Commodity prices fell the most in a month as copper led a slump in industrial metals, while emerging-market stocks dropped for a second day as investors sought refuge in dollar assets. South Africa’s benchmark stock index slumped the most in four weeks, led by raw-materials exporters including BHP Billiton Ltd. and Anglo American Plc.
“Global growth fears were fueled by weak manufacturing data out of China,” Michael Keenan, a Johannesburg-based analyst at Standard Bank Group Ltd., wrote by e-mail “The rand is victim once again to risk aversion and the firmer dollar.”
South Africa’s 6.75 percent bonds due 2021 dropped for a third day, driving the yield 13 basis points, or 0.13 percentage point, higher to 8.022 percent.