The rand declined to the lowest in a week as metal prices declined, damping South Africa’s outlook for income from exports. Bond yields fell for a sixth day.
The rand retreated as much as 1.5 percent to 8.7722 per dollar, the weakest since Oct. 16. It traded 1.2 percent weaker at 8.7395 a dollar as of 3:30 p.m. in Johannesburg, the worst performance out of 16 major market currencies monitored by Bloomberg. Yields on 6.75 percent bonds due March 2021 dropped one basis point to 6.61 percent.
Commodities declined, erasing this year’s gain, as slowing global economic growth may curb demand for raw materials even as central banks pledge more stimulus. Copper fell to the lowest level in more than six weeks after Xstrata Plc said it has cut its output because of a slowdown in China and before a report forecast to show euro-area consumer confidence stayed at the lowest level since May 2009. Metals and other commodities account for 45 percent of South Africa’s exports.
“As long as commodity prices remain soft, the rand will stay on the back-foot,” Bruce Donald, a currency strategist at Standard Bank Group Ltd. in Johannesburg, wrote in a note e-mailed to clients today. “The risk premium built into the rand will likely remain in place” over the next three to six months, he said.
The Standard & Poor’s GSCI Index of raw materials fell for a third day to the lowest in more than two months. South Africa’s benchmark stock index dropped as shares in commodity exporters, including BHP Billiton Ltd. and Anglo American Plc, slumped.
Caterpillar Inc., the world’s largest maker of construction and mining equipment, yesterday forecast sales growth for 2013 that would be slower than in the previous three years as the global economy decelerates, while General Electric Co. cut its 2012 sales target and quarterly profit at McDonald’s Corp. fell the most in more than three years. The U.S. is South Africa’s third-biggest trading partner after China and Japan.
“Weaker-than-expected corporate earnings announcements out of the U.S. weighed on sentiment,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The disappointments fueled concern over the health of corporate America.”
Continuing labor unrest at South African gold mines contributed to the rand’s decline, said Danny Pienaar, a currency trader at Tradition UK Ltd. Gold Fields Ltd., Harmony Gold Mining Co. Ltd. and AngloGold Ashanti Ltd. have issued ultimatums for striking workers to return to work.
“Some negative news flow coming out of the mining sector” together with demand for dollars from South African importers helped push the rand weaker, Pienaar said by phone from Johannesburg.
Foreign investors sold a net 167 million rand ($19.1 million) of South African bonds yesterday, according to JSE Ltd. data.