South African Rand Falls Most in Three Weeks as Carry Unwinds

South Africa’s rand tumbled a second day, leading declines against the dollar among major and emerging currencies, amid speculation inflows arising from Anheuser-Busch InBev SA’s purchase of SABMiller Plc may have run their course.

The rand slumped 1.4 percent to 13.8087 per dollar by 1:10 p.m. in Johannesburg, heading for the biggest drop on a closing basis since Sept. 9 and paring its gain this month to 4.3 percent. 

South African universities have been shut down amid protests over fees, while local lobby groups representing companies have expressed concern that President Jacob Zuma hasn’t done enough to allay concerns that Finance Minister Pravin Gordhan is still being targeted by some state agencies, undermining efforts to rein in spending and stamp out corruption.

Even so, the South African currency strengthened in recent weeks as foreign investors seeking high-yielding assets bought the nation’s stocks and bonds, and amid speculation AB Inbev was buying rand to pay local shareholders for its $104 billion acquisition of SABMiller. The transaction was approved by SABMiller shareholders on Wednesday.

“If you have a look at how the rand’s performed through the course of the past six to eight weeks, it’s done reasonably well given all the political developments,” George Glynos, managing director and chief economist at ETM Analytics, said by phone. “It speaks to a carry-trade contingent that has been fairly significant,” he said, referring to traders who borrow currencies of countries with low interest rates to buy high-yielding assets. “That carry trade contingent, without the backstop of AB Inbev inflows that might support their trade in the month ahead, is potentially unwinding.”

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