Rand leads currency declines as bond yields rise to year high

The rand fell for a second day on Monday, tracking commodity prices lower as China’s industrial production trailed estimates. Bond yields rose to the highest in a year.

China’s manufacturing and trade expanded less than estimated last month. The world’s second-biggest economy is the biggest buyer of South African raw materials, including iron ore and coal. Non-farm payrolls in the United States rose more than economists forecast in May, a June 7 report showed. This came two weeks after US Federal Chairman Ben S. Bernanke said $85-billion of monthly bond purchases may be reined in if there is sustained improvement in the jobs market.

“While the US data has been too strong for comfort, Chinese figures have been too weak,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said. “The net result of the US and Chinese data has been to put the high-yielding commodity currencies under pressure.”

South Africa’s currency slumped 2.2% to R10.18 per dollar as of 10:20am in Johannesburg, the worst performance out of 24 emerging-market currencies monitored by Bloomberg. Yields on benchmark 10.5% bonds due December 2026 jumped for a fourth day, rising 22 basis points to 8.18%, the highest since June 14 last year.

The Standard & Poor’s GSCI Index of raw materials declined for the first time in six days as prices of metals including copper, nickel and platinum fell. Metals and other mining commodities account for more than 50% of South Africa’s exports, according to government data. – Bloomberg

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