The rand slumped to a three-week low and South African bond yields rose to the highest in three months on concern that the nation will struggle to plug its current-account shortfall as U.S. monetary stimulus wanes.
South Africa’s rand declined and bonds fell after a gauge of Chinese manufacturing dropped and the Federal Reserve signaled stimulus that fueled demand for the nation’s debt may be reduced in coming months.
South Africa’s currency weakened for the first time in three days as deficit concerns continued to weigh on the continent’s biggest economy, even after revised data showed the gap between imports and exports narrowed.
The dollar rose against 13 of its 16 most-traded peers as a U.S. political stalemate persisted and President Barack Obama warned the nation faces a “very deep recession” if Congress doesn’t raise the debt limit, fueling haven demand.
The rand declined against the dollar and South African bond yields rose as investor appetite for riskier assets waned while U.S. lawmakers wrangled over the nation’s debt ceiling and government shutdown.
The rand gained to the strongest level in a week as yields among the highest in emerging markets lured foreign investors to South Africa’s bonds, outweighing risk aversion sparked by the U.S government shutdown.
The rand strengthened against the euro and bond yields fell for a second day after European central bankers signaled their intention to maintain monetary stimulus that has helped boost demand for higher-yield assets.
South African bonds gained for a third day, driving yields to the lowest in more than four months, after Federal Reserve officials signaled a delay in reducing stimulus. The rand fluctuated between gains and losses.