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Johannesburg - The rand weakened by the most in nine weeks against the dollar to lead losses among global currencies as evidence of subdued global economic growth prompted declines in commodities.
The rand fell as much as 2.5%, the most on a closing basis since Feb. 26 and the worst performance among 31 emerging market and developed nation currencies tracked by Bloomberg. Prices of commodities were declining for a second day, as was the MSCI Emerging Markets Currency Index.
Stocks in Johannesburg dropped to the lowest in three weeks after a gauge of Chinese manufacturing fell in April. China is the biggest consumer of South African raw materials, which account for about half of the nation’s exports.
“Everything is a bit down today - the rand is caught up in the tailwinds of that,” said Andre Botha, a dealer at Treasuryone in Pretoria.
The rand was also dragged lower as the Australian dollar tumbled after the central bank unexpectedly cut interest rates to a record as it seeks to help spur a revival in industries outside mining. After gaining 1.2% to rack up a third week of gains last week, the rand retreated 2.3% to 14.6070 at 19:43 GMT in Johannesburg, weakening beyond its 200-day moving average for the first time since April 18. A breach of that level is seen by some technical analysts as a bearish signal for the South African currency.
“The rand tends to be more excessive in its weakening and strengthening,” said Ion de Vleeschauwer, chief dealer at Bidvest Bank in Johannesburg. “People use the rand as a proxy for other emerging-market bets. That’s just the nature of the currency.”
Stocks on the FTSE/JSE Africa All Share Index fell 2%, the most since February 9 and the lowest since April 11, while yields on benchmark government bonds climbed 15 basis points, the most since March 15, to 9.13%. Yields are now at their highest in three weeks.
The rand gained for a third month in April, supported by a surge in inflows into the bond market. Figures from the Johannesburg Stock Exchange on Tuesday suggest that trend may be reversing, with offshore investors selling R1bn ($69m) of local debt after buying R8.3bn the week before.
