The rand declined for a fourth day, its longest losing streak in almost four months, on concern that Greece won’t conclude a debt-swap before tomorrow’s deadline, risking growth in Europe, South Africa’s main trading partner.
South Africa’s currency retreated 0.1 percent to 7.6561 per dollar as of 5:02 p.m. in Johannesburg. It has declined 2.9 percent since March 1, the longest losing streak since November. The yield on the nation’s 77 billion rand ($7.5 billion) of 6.75 percent bonds due 2021 dropped one basis point, or 0.01 percentage point, to 7.87 percent, the lowest since Feb. 29.
The Greek government said it will use collective action clauses, which may trigger credit default swaps, to compel bondholders to accept its debt restructuring if necessary. Emerging-market stocks fell to a five-week low and bond risk rose to the highest in two weeks.
“De-risking is taking place in European asset markets,” George Glynos, an economist at Johannesburg-based ETM Analytics, wrote in e-mailed comments today. “In these kinds of markets, the possibility of upside dollar-rand moves simply cannot be ruled out.”
Investors with holdings amounting to 39.3 percent of the Greek bonds eligible for the nation’s debt swap have agreed to sign on, moving the country closer to the biggest sovereign restructuring in history.
The rand gained in earlier trading after South Africa’s foreign reserves rose to the highest on record and business confidence climbed to an eight-month peak.
Gross foreign exchange and gold reserves rose 0.9 percent in February from the previous month to $51.9 billion as the price of gold surged and the dollar weakened, boosting the value of other foreign currencies, the Pretoria-based Reserve Bank said. The central bank probably made no “material” dollar purchases in the month, signalling it won’t intervene to curb rand strength, Standard Bank Group Ltd. said.
“Although the Reserve Bank does not target a particular level of the rand, the data could be seen to suggest that it might not have been entirely averse to the rand’s strength in February,” Bruce Donald and Nomvuyo Guma, Johannesburg-based analysts at Standard Bank, said in e-mailed comments. “This could mean that into any resumption of capital inflows in the period ahead, Reserve Bank activity is unlikely to prove a material resistance point to rand strength.”
South Africa’s benchmark stock index advanced for the first time in four days after MTN Group Ltd., the biggest South African-based company, reported a rise in earnings and customer numbers. Mining companies including BHP Billiton Ltd. and Anglo American Plc gained as some industrial metal prices rose.
Companies including Gold Fields Ltd. halted production today as members of South Africa’s biggest trade union federation went on a one-day strike to force the government to scrap short-term work contracts and highway tolls.
“This event will be fun to watch but we expect it to have no discernable impact of foreign exchange markets,” George Glynos, an economist at Johannesburg-based ETM Analytics, wrote in e-mailed comments today.
The yield on South Africa’s $1.5 billion of 4.665 percent bonds due 2024 dropped four basis points to 4.17 percent, narrowing the premium investors demand to hold the debt rather than U.S. Treasuries by seven basis points to 221 basis points.