South African Rand Declines Against Dollar, Euro for Second Day

By Garth Theunissen

Nov. 6 (Bloomberg) -- South Africa's rand declined against the dollar for a second day.

The currency fell as the country's benchmark stock index dropped for a second day, following losses in Asia and the U.S. The rand was buffeted yesterday as business confidence slid the most in more than 18 years in October amid the worst financial- market crisis since the 1930s.

``Emerging-market currencies are very dependent on global risk sentiment at the moment, of which equities are a key barometer,'' Benoit Anne, an emerging-markets debt and foreign- exchange strategist at Merrill Lynch & Co. in London, said in a telephone interview yesterday. ``Equity markets set the tone for risk appetite and sentiment toward emerging market currencies.''

The currency weakened to 9.8875 per dollar, before trading at 9.8600 as of 9:05 a.m. in Johannesburg, from 9.7712 yesterday. It fell versus 13 of the 16 most-actively traded currencies monitored by Bloomberg, slipping 1.1 percent against the yen. It weakened to 12.6735 per euro, from 12.6572.

Anne's new trade recommendation to clients is to ``sell the rand against the Turkish lira over a three-month time horizon.'' ``The Turkish lira is likely to outperform the rand in the near term,'' Anne said. ``The possibility of an IMF loan for Turkey will cushion the lira and boost confidence in the country.''

The lira weakened to 1.5460 per dollar today, from 1.5300. It was little changed versus the rand, trading at 6.3812.

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