The rand declined and bond yields rose on concern Europe’s debt crisis and slowing global growth will continue to weigh on South Africa’s export prospects.
The rand retreated 0.3 percent to 8.7361 per dollar as of 4:37 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 rose one basis point, or 0.1 percentage point, to 7.63 percent after declining eight basis points last week.
Indian industrial production unexpectedly dropped in September, while Japanese data showed the economy shrank in the three months through September and may face its third recession since 2008 with analysts predicting another retreat this quarter. The euro traded close to a two-month low against the dollar as European policy makers prepare to meet to seek a plan to maintain Greece’s solvency.
“The euro zone remains mired in recessionary economic conditions, which may continue to bring downward pressure on the South African economy,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “We see no compelling reason why the rand should appreciate.”
The U.S. risks entering a recession that will hurt economic growth worldwide should Congress allow the so-called fiscal cliff of automatic tax increases and spending cuts next year, Fitch Ratings said Nov. 8.
High-yielding currencies including the rand may extend declines as investors turn to the safety of the dollar and yen, according to Bruce Donald, a strategist at Standard Bank Group Ltd. in Johannesburg.
“Risk aversion will stay a bit more elevated,” he said in e-mailed comments. “The elevation will presumably rise as long as the fiscal cliff problem remains unresolved.”