The rand depreciated to head for its first weekly decline in four as metal prices declined on concern that monetary policy tightening in China will curb demand from the biggest buyer of South African raw materials.
The currency of Africa’s largest economy posted the largest decline among 24 emerging markets tracked by Bloomberg, while China’s one-month interbank rate surged the most since June amid concern authorities are curbing credit to cool inflation as growth accelerates. South Africa’s fiscal deficit and debt levels were “sustainable,” Finance Minister Pravin Gordhan said when releasing his mid-term budget two days ago.
Monetary tightening by China “weighed on local markets and saw bond yields retreat,” Thando Vokwana, a fixed-income trader at FirstRand Ltd. in Johannesburg, said in an e-mailed note. “Consolidation may soon follow, with the rand seemingly losing steam.”
The rand depreciated 0.6 percent to 9.8173 per dollar as of 4:50 p.m. in Johannesburg, for a retreat this week of 0.3 percent. Yields on benchmark 10.5 percent bonds due December 2026 climbed seven basis points, or 0.07 percentage point, to 7.84 percent. The yield has increased 11 basis points this week.
The Standard & Poor’s GSCI Index of raw materials headed for a weekly loss of 2.4 percent, as prices for copper and platinum declined. Metals and other commodities accounted for 60 percent of South Africa’s exports in the first eight months of 2013, according to Treasury data. The nation has the world’s largest-known reserves of platinum and chrome and is the sixth-biggest gold producer.
The rand earlier pared its loss after orders for U.S. equipment and machinery unexpectedly declined in September for the second time in three months, indicating business spending was weakening ahead of the partial government shutdown. U.S, consumer confidence dropped in October to a 10-month low, a separate report showed.