Rand Slumps Most Among Emerging Markets as Investors Avoid Risk

  • South Africa currency tends to overshoot: Treasuryone’s Pearce
  • Fed meeting, U.K. June 23 vote on EU weighing on investors

South Africa’s rand slumped as much as 2 percent to lead emerging-market currency losses against the dollar as investors switched to less-risky assets after a rally prompted by bets the U.S. will delay raising borrowing costs.

After four daily closes stronger than 15 to the dollar, the currency was 1.8 percent lower at 15.0800 by 3:56 p.m. in Johannesburg, falling the most since May 18 and trimming its second weekly gain to 0.1 percent.

The MSCI Emerging Markets Currency Index declined a second day as investors turned cautious before next week’s U.S. Federal Reserve meeting and as the June 23 vote in the U.K. on whether to leave the European Union approaches. Most of the 24 developing-nation currencies tracked by Bloomberg dropped against the greenback.

“It’s more wait and see -- nobody wants to actually put their money in anything risky until we have a bit more certainty,” said Phillip Pearce, a dealer at Treasuryone in Pretoria, the South African capital. “With the FOMC next week and Brexit coming in two weeks’ time, there’s a lot more risk-off than we saw earlier in the week. The rand does tend to overshoot other currencies.”

South African benchmark government rand-denominated bonds reversed gains, with the yield on the December 2026 issue rising 1 basis point to 9.05 percent. Stocks were heading for their first weekly decline in five, as the FTSE/JSE Africa All Share Index fell for a third day.

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