Rand Posts Biggest 5-Day Drop Since October on Growth Concern

By Garth Theunissen

Jan. 10 (Bloomberg) -- South Africa’s rand posted its biggest weekly drop in 2 1/2 months after manufacturing sank the most in nine years and house prices grew the least in 12 years, more signs the continent’s largest economy is slowing.

The rand had its steepest five-day drop since Oct. 24 after U.S. jobless reports showed the world’s biggest economy shed the most jobs since the end of World War II, highlighting the severity of the country’s recession.

“The declining global growth story and the negative impact it’s having on the domestic economy is what’s driving rand negativity,” said Natheem Alexander, a bond and currency trader at Peregrine Quant, a hedge fund in Cape Town. “Poor growth tends to translate into currency weakness.”

The rand traded at 9.7378 per dollar as of 5 p.m. in Johannesburg Jan. 9, from 9.3147 on Jan. 2, taking its weekly decline to 4.5 percent. It also slipped versus all 16 most- actively traded currencies monitored by Bloomberg this past week, depreciating 1.5 percent against the euro to 13.1637.

Factory output, which accounts for 16 percent of South Africa’s $278 billion economy, contracted for a second straight month in November, slumping 4.4 percent, Pretoria-based Statistics South Africa said this week. Manufacturers including ArcelorMittal South Africa Ltd., the country’s biggest steel producer, are scaling back output on lower demand.

South African house-price growth slid to 3.8 percent in 2008, the slowest in 12 years, as interest rates at a five-year high hurt consumers, mortgage lender Absa Group Ltd. said. Growth in nominal house prices eased from 14.5 percent in 2007, Absa said.

‘Big Influence’

In the U.S., the decline in payrolls was in line with forecasts, bringing job losses for 2008 to 2.589 million, the most since 1945, according to a Labor Department report in Washington. The jobless rate rose more than forecast to 7.2 percent, a 15-year high, from 6.8 percent.

A separate report showed the total number of Americans receiving unemployment benefits advanced to 4.6 million, the most since 1982,

“The world’s biggest economy is in trouble and that’s going to have a big impact on the outlook for emerging-market growth prospects,” Alexander said.

The currency will extend last year’s 28 percent slump in 2009, declining to 10.50 per dollar by year-end as the global financial crisis restricts South Africa’s ability to lure foreign capital and a drop in commodity prices cuts export revenue, Rand Merchant Bank predicted in a client note.

Platinum, which competes with gold as the country’s biggest export earner, has slumped almost 60 percent from its March high.

South African government bonds fell this week, with the yield on the 13.5 percent security due September 2015 gaining 26 basis points from Jan. 2 to 7.48 percent. Yields move inversely to bond prices.

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