South Africa's Rand Declines to One-Week Low Versus U.S. Dollar

By Garth Theunissen

Sept. 2 (Bloomberg) -- South Africa's rand fell to a one- week low against the dollar as declines in precious metals prices damped earnings prospects for the country's miners and pushed stocks lower.

The rand weakened for a second day after the benchmark stock index dropped as weaker gold and platinum prices, the nation's biggest export earners, prompted a slide in mining shares. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.

``Dollar strength and associated commodity weakness results in a weakening bias for the rand,'' said John Cairns, head of foreign-exchange research at Rand Merchant Bank in Johannesburg. ``Emerging-market currencies are also coming under pressure as global economic growth slows.''

The rand fell as much as 0.9 percent to 7.8277 per dollar and traded at 7.8190 by 9:42 a.m. in Johannesburg, from 7.7555 yesterday. It may fall to 7.85 per dollar by the end of today, Cairns said. The rand also weakened versus 13 of the 16 most- actively traded currencies monitored by Bloomberg, losing 0.2 percent against the euro to 11.3535, from 11.3368 yesterday.

South Africa's FTSE/JSE Africa All Share Index dropped as much as 1.4 percent, led by declines in Anglo American Plc, BHP Billiton PLC and Impala Platinum Holdings Ltd.

Precious Metals

Gold fell for a third day while platinum dropped to an eight-day low after the dollar surged to a six-month high, eroding the appeal of the metals as alternative investments. Gold and platinum, which are priced in dollars, typically move in the opposite direction to the U.S. currency. Gold fell 1.3 percent to $807.20 an ounce while platinum slipped 2.3 percent to $1,412.50 an ounce. Europe's Dow Jones Stoxx 600 Index slipped 0.4 percent while the MSCI Asia Pacific Index decreased 1.4 percent.

Government bonds fell for a fourth day, with the yield on the benchmark 13.5 percent security due September 2015 rising 8 basis points to 9.31 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations, climbed 12 basis points to 9.96 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net