The rand fell to the lowest in six months as Spain struggled to rescue its troubled banks and China damped speculation of large-scale stimulus, hurting demand for riskier assets.
South Africa’s currency depreciated 2.3 percent to 8.5050 per dollar as of 4:20 p.m. in Johannesburg, the weakest level since Nov. 28 and the worst performance out of the 16 most-traded currencies monitored by Bloomberg. Yields on the nation’s 13.5 percent bonds due 2015 dropped one basis point, or 0.01 percentage point, to 6.40 percent.
The euro retreated to a two-year low against the dollar and Spanish bond yields climbed after the country’s central bank Governor, Miguel Angel Fernandez Ordonez, resigned a month early amid criticism over the nationalization of Bankia group, the nation’s third-largest lender. China has no plans to introduce stimulus measures of the scale seen during the global financial crisis, the official Xinhua News Agency said yesterday.
“The rand finally plays catch-up on the euro’s demise,” Brigid Taylor, Johannesburg-based head of flow sales at Nedbank Capital, unit of Nedbank Group Ltd., said in e-mailed comments. “As risk appetite remains under pressure globally, we continue to see massive pressure on local equities, lack of meaningful support for bonds and rand deterioration.”
The Standard & Poor’s GSCI Index of raw materials slumped to the lowest in almost eight months. South Africa’s benchmark stock index retreated as much as 1.2 percent, led by commodity exporters including Anglo American Plc and BHP Billiton Ltd.
“With commodities falling, equities dipping and concerns over Spain rising, it’s hard to see why the rand should remain resilient,” John Cairns and Josina Solomons, Johannesburg-based analysts at Rand Merchant Bank, said in e-mailed comments.
The South African currency’s three-month implied volatility versus the dollar climbed to 19.5 percent today, the highest since January, as options traders anticipate wider price swings in coming weeks. The rand’s three-month implied volatility is the highest out of 16 major currencies monitored by Bloomberg.
The rand extended its decline after data showed that South African credit growth slowed last month, prompting investors to pare bets on an interest-rate increase, easing pressure on the central bank to lift interest rates from a 30-year low.
Private sector credit extension to households and businesses rose 7.3 percent, compared with 9.2 percent growth in March, the Pretoria-based Reserve Bank said on its website today. The median estimate in a Bloomberg survey of 13 economists was for credit to expand 9 percent.
“We do not expect the MPC to change the repo rate this year, considering the heightened uncertainty in the euro zone,” Tebogo Mosepele, a Johannesburg-based analyst at Standard Bank Group Ltd., said in e-mailed comments. “The current accommodative monetary stance is appropriate, particularly given that South Africa’s economic conditions are likely to remain lacklustre this year.”
Forward-rate agreements declined as traders pared bets on an interest-rate increase this year. Three-month forward-rate agreements starting in February fell two basis points to 5.46 percent, the lowest since December.