Rand Set for Six-Week Low to Lead Losses Among Major Currencies

  • S&P repeats concerns about growth weeks before ratings call
  • Stronger dollar after retail sales data pushes currency lower

The rand headed for the weakest level in six weeks as stronger-than-expected retail sales in the U.S. bolstered the dollar and after S&P Global Ratings said South Africa’s economic growth continues to disappoint.

The South African currency fell 2 percent to 15.2971 per dollar by 4:36 p.m. in Johannesburg, the weakest since March 28 on a closing basis, and the worst performance among 31 major and developing-nation currencies tracked by Bloomberg. The rand is heading for a drop of 2.6 percent this week, the second five-day decline and the largest retreat so far in May among emerging market currencies.

Stop-loss orders triggered at the 15.20 level pushed the rand to the day’s low of 15.2281, said Ion de Vleeschauwer, chief dealer at Bidvest Bank in Johannesburg.

“There’s been a strong dollar this afternoon and better U.S. retail sales, so the rand is struggling,” De Vleeschauwer said. Support for the rand seen this week in the 15.20 to 15.30 area could kick in and see the currency drift stronger toward the close, he said.

U.S. retail sales jumped in April by the most in a year and the dollar rose to the highest in more than a month after the stronger-than-expected data reignited speculation that interest rates in the world’s largest economy may increase this year. The MSCI Emerging Markets Currency Index fell 0.5 percent.

Three weeks before S&P is due to announce its assessment of South Africa’s BBB- ranking, the ratings company reiterated concern that the country’s economic growth was faltering. A Bloomberg survey last week showed 12 of 13 economists and analysts expect a cut to non-investment grade by the end of 2016.

Discussions on the decision are still underway, S&P Managing Director for sub-Saharan Africa Konrad Reuss said in Johannesburg on Friday. Mining production slumped 18 percent in the year through March, while manufacturing output fell 2 percent, data showed on Thursday.

“Weaknesses in the South African economy have really come to the fore,” Reuss said. “Growth is the crux at the moment.”

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