The rand dropped to record lows against both the dollar and the euro as concern grew that China's weakening economy will deepen a rout in prices of commodities that South Africa exports and relies on for foreign exchange.
The currency of Africa's most-industrialized economy fell to as low 14.1588 against the dollar and 15.9708 to the euro. Assets in South Africa, the world's biggest platinum and manganese producer and the continent's largest of iron ore and coal, are under pressure as the price of export products retreats and concern mounts that economic growth is slowing in China, its top export destination.
Stocks in the Asian nation plunged Tuesday, with the benchmark gauge headed for the steepest quarterly drop in 17 years, after data on Monday showed industrial profits retreating the most in at least four years, while an official manufacturing report scheduled for Thursday will likely a show a contraction.
"The rand is simply suffering from being hit by both risk aversion towards high-yield currencies and the falling commodity prices," John Cairns, an analyst at FirstRand Ltd.'s Rand Merchant Bank unit, wrote in an e-mailed note. Market sentiment "remains very negative and the pressure on the rand appears relentless," he said.
Returns from raw materials fell in August to the lowest level since 1999 as supplies outstrip demand amid forecasts for the slowest Chinese growth in more than two decades. Stocks in South Africa declined to a two-week low Monday, with Kumba Iron Ore Ltd., coal producer Exxaro Resources Ltd., and world No. 3 platinum company Lonmin Plc losing more than 9 percent. Glencore Plc lost 27 percent in Hong Kong after the commodities trader and producer declined 26 percent in Johannesburg and 29 percent in London Monday.
The rand weakened 0.3 percent to 14.1004 per dollar at 8:44 a.m. in Johannesburg and was 0.5 percent weaker at 15.8925 against the euro.
Source: Rand Drops Record Low as Commodities Rout Weighs on Currency
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