South African Rand Leads Currency Declines as Liquidity Dwindles

  • Global currencies, bonds sold off as stimulus prospects wane
  • Rand-dollar trading volumes fall ahead of weekend: Nedbank

South Africa’s rand fell the most in more than two weeks against the dollar, leading global currency losses amid lingering political risks and as central banks signaled they are starting to question further monetary easing.

The rand declined 1.7percent to 14.3715 per dollar by 5:38 p.m. in Johannesburg, the biggest drop on a closing basis since Aug. 23, after a police unit summoned Finance Minister Pravin Gordhan to answer to charges related to alleged irregularities at the tax authority. That pared the currency’s gain this week to 0.8 percent, snapping three weeks of declines. Yields on benchmark rand bonds due December 2026 climbed 14 basis points to 8.76 percent.

Currencies and stocks across emerging markets came under some pressure after the European Central Bank on Thursday stopped short of signaling more stimulus for its economies and as North Korea conducted its biggest-ever nuclear test. Trading volumes in the rand were low on Friday, with traders hesitant to take large positions before the weekend amid concern about Gordhan’s future.

“Liquidity has been rather poor in dollar-rand today, hence the moves have been exacerbated,” said William van Rijn, a trader at Nedbank Group Ltd. in Johannesburg.

The dollar gained against all but two of the 31 emerging-market and developed-nation currencies tracked by Bloomberg as financial markets ran into headwinds after ECB President Mario Draghi played down the prospect of an increase in asset purchases and DoubleLine Capital Chief Investment Officer Jeffrey Gundlach said it’s time to prepare for higher rates. A “hawkish tilt” by Federal Reserve Governor Lael Brainard on Monday could pose another risk event, according to Barclays Plc.

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