The rand weakened to its lowest in a week against the dollar on concern that the global economic recovery is faltering and after Greece’s debt talks have reached a stalemate damped demand for riskier assets.
South Africa’s currency depreciated as much as 1.6 percent to 8.0658 per dollar, the weakest level since Jan. 18 on an intraday basis, and traded 1.1 percent down at 8.0268 as of 4:31 p.m. in Johannesburg. It declined 0.6 percent against the euro to 10.4065 and 0.9 percent against the pound to 12.5007.
“People were thinking the recovery has started, but they’re coming to the rude awakening that we’re not out of the woods by a long way,” Ion de Vleeschauwer, chief dealer at Johannesburg-based Bidvest Bank Ltd., which runs South Africa’s largest chain of money changers, said by phone. “There is still a lot of uncertainty around.”
The Standard & Poor’s GSCI Index of raw material prices declined for a second day and South Africa’s benchmark stock index dropped after the International Monetary Fund yesterday cut its forecast for global growth and warned that the European debt crisis threatens to derail the world economy. The U.K. economy shrank 0.2 percent in the fourth quarter, leaving Britain on the brink of another recession. The European Central Bank was said to be opposed to the restructuring of Greek bonds, adding to concern the nation will fail to win a deal to reduce its debt.
The rand reached 7.8965 per dollar earlier in the session today, its strongest level since Nov. 14. Demand for the courrency at around 7.90 per dollar, a so-called resistance level, sparked its initial retreat, De Vleeschauwer said. A resistance level is a price level where a security is expected to receive sell orders.
South Africa’s 13.5 percent bonds due 2015 fell for the first time in three days, driving the yield up one basis point, or 0.01 percentage point, to 6.66 percent.