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Rand Weakens as South African Bonds Cap Worst Quarter in 2 Years

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June 28 (Bloomberg) -- The rand weakened, extending its worst six-month decline against the dollar since the second half of 2011. South African bonds fell, pushing yields higher for the first quarterly loss in more than two years.

The currency of Africa’s largest economy slumped as data showed the nation’s trade gap narrowed more than expected in May because of a 6 percent drop in imports and 0.1 percent increase in exports. The rand has dropped 15 percent against the dollar this year, the most of 16 major units monitored by Bloomberg, as mining strikes hurt economic growth and curb output.

“South Africa still needs to see much more export momentum for a meaningful improvement in its trade profile,” Razia Khan, the London-based regional head of African research for Standard Chartered Plc, said in e-mailed comments. “In an environment where there are reasons to call into question any easy external financing of the current account deficit, this is still a big negative.”

The rand was 0.7 percent weaker at 10.0091 per dollar as of 3:29 p.m. in Johannesburg. The nation needs inflows of 16 billion rand ($1.6 billion) a month, on average, to finance the shortfall on its current account, which was 5.8 percent of gross domestic product in the first quarter. The trade shortfall eased to 11 billion rand in May from 15 billion in April, Statistics South Africa said today.

The currency also weakened as gold fell to a 34-month low, heading for its biggest quarterly loss since at least 1975, and platinum slid. Metals account for more than 50 percent of export earnings for South Africa, which has the world’s largest known platinum and chrome reserves and is the fifth-largest producer of gold.

Yields Fall

The nation’s debt has lost 2.2 percent this quarter through yesterday, heading for the first three-month decline since the first quarter of 2011, according to sovereign indexes monitored by the European Federation of Financial Analysts Societies and Bloomberg. Foreigners bought a net 1.1 billion rand in local bonds yesterday, reducing net sales this month to 6.68 billion rand, according to data from the Johannesburg Stock Exchange.

Yields on 10.5 percent benchmark government debt due December 2026 rose for the first time in four days, increasing 2 basis points, or 0.02 percentage point, to 7.94 percent, paring this month’s increase to 31 basis points.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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