The rand weakened against the dollar after Fitch Ratings added to concern the euro region’s debt crisis will worsen, stifling economic growth and demand for South Africa’s metal exports.
The currency depreciated as much as 0.7 percent and traded 0.5 percent lower at 8.1473 as of 5:19 p.m. in Johannesburg. Against the euro, it strengthened 0.3 percent to 10.3326.
Emerging-market stocks fell and Standard & Poor’s GSCI Index of raw materials slipped after Fitch’s head of sovereign ratings David Riley said the European Central Bank should boost bond purchases to combat the debt crisis and prevent a collapse of the shared currency. German Finance Minister Wolfgang Schaeuble rejected joint euro-region bond sales as long as there are no rules in place to enforce coordinated economic policies in the area, the Stuttgarter Zeitung reported. The euro region is South Africa’s biggest trading partner.
“Most of the news out of Europe today has been negative, and that has contributed to the adverse market mood,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said by phone. “The problems there seem to be continuing, especially since Germany again rejected euro bond sales.”
The euro weakened against all but one of the 16 major currencies after Germany’s Federal Statistics Office said the economy probably shrank in the fourth quarter from the third, and the European Union cut euro-area growth to 0.1 percent in the third quarter, from 0.2 percent estimated earlier. The rand often trades in tandem with the euro, with a statistical correlation of 0.7, according to data compiled by Bloomberg. A value of 1 would mean they moved in lock step.
South Africa’s $1 billion of 5.875 percent bonds due 2022 declined, driving the yield up three basis points, or 0.03 percentage point, to 4.41 percent.