Rand Declines First Week in Four on Growth Concern, Commodities

The rand declined for the first weekly retreat in four on concern slowing growth will damp demand for South Africa’s assets and as commodity prices fell.

The currency slipped as much as 0.5 percent, and traded 0.3 percent weaker at 8.6652 per dollar as of 3:24 p.m. in Johannesburg. The rand has retreated 0.3 percent this week, paring a 1.6 percent advance in the preceding three weeks. Yields on benchmark 6.75 percent bonds due March 2021 were unchanged at 6.67 percent today, for a decline of three basis points this week.

Unemployment in Africa’s biggest economy rose in the third quarter as mining companies shed jobs amid wildcat strikes, a report showed yesterday. The Kagiso Purchasing Managers’ Index dropped for a third month in October, indicating a slump in manufacturing. South Africa’s economy will probably expand 2.5 percent this year, the Treasury estimates, down from 3.1 percent in 2011, as labor unrest and Europe’s debt crisis lower demand for exports.

“Yesterday’s data releases point to a subdued growth backdrop,” Carmen Nel and Mamello Matikinca, analysts at Johannesburg-based Rand Merchant Bank, wrote in a note e-mailed to clients today. “The increase in labor costs and social unrest could lead to renewed job losses.”

Standard & Poor’s GSCI Index declined for the first time in three days as prices of metals including copper fell on concern demand from China may slow. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.

Foreign investors sold a net 6.2 billion rand ($714 million) of South African stocks in October, according to JSE Ltd. data, as mining strikes hampered growth. The nation needs about 16 billion rand of inflows a month to plug its current account gap and prevent the rand from weakening, according to Standard Bank Group Ltd. calculations. The shortfall widened to 6.4 percent of gross domestic product in the second quarter, the most in four years.

“For foreign interest to return to the local equity market in any significant way, it would perhaps either have to cheapen or the growth story would have to brighten,” Bruce Donald, a Johannesburg-based currency strategist at Standard Bank, said in e-mailed comments. “We are not holding our breath with respect to the latter.

The rand’s three-month implied volatility against the dollar dropped 22 basis points today to 14.5 percent, the lowest since May. The South African currency’s implied volatility remains the highest out of emerging-market and major currencies monitored by Bloomberg.

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