The rand dropped and South African stocks fell for a fourth day as gold declined, factory output slowed and speculation grew that central banks will raise borrowing costs, damping demand for emerging-market assets. The currency of Africa’s biggest economy weakened 1 percent to 7.2971 per dollar at 5:13 p.m., extending this year’s decline to 9.1 percent, the most among more than 20 emerging markets tracked by Bloomberg. Anglo American Plc led the FTSE/JSE Africa All Share Index 0.8 percent lower to 32,409.48 as copper and gold retreated for a second day. Swaps traders have boosted bets that the European Central Bank will lift its target rate in the next 12 months and China raised interest rates for the third time in four months this week to curb inflation. Manufacturing growth in South Africa fell to 0.2 percent in December from 4.6 percent a month earlier, according to a report today. “Elevated food and energy prices have increased the likelihood that many emerging markets will have to embark on monetary tightening, which naturally is of concern to equity bulls,” Michael Keenan, a currency strategist at Standard Bank Group Ltd. in Johannesburg, wrote in an e-mailed note to clients. Disappointing mining or manufacturing data may further weaken the rand as it curbs the outlook for South Africa’s economic recovery, he wrote. The rand may drop to 7.32 per dollar in the “coming days,” according to the report. Fund Outflows Gold, which with platinum accounts for about a fifth of South Africa’s export earnings, fell 0.6 percent to $1,354 an ounce in New York, and platinum slipped 1.3 percent. Copper dropped 0.4 percent in London. Investors pulled about $7 billion from emerging-market equity funds in the week ended Feb. 2, the biggest weekly outflow in three years, according to research firm EPFR Global. Swaps traders expect the ECB to increase its target rate by 82 basis points over the next 12 months, up from 44 basis points predicted at the end of last year, a Credit Suisse Group AG index shows. European inflation accelerated to 2.4 percent in January, more than economists forecast, the European Union’s statistics office said Jan. 31. South Africa’s inflation may reach the upper end of the central bank’s 3 percent to 6 percent target range “sooner than expected” as oil and food prices increase, Governor Gill Marcus said Feb. 6. Raising Forecast The South African Reserve Bank, which left its benchmark interest rate unchanged at a 30-year low of 5.5 percent on Jan. 20, raised its inflation forecast for this year to an average of 4.6 percent from 4.3 percent, and its 2012 estimate to 5.3 percent from 4.8 percent. Investors in interest-rate derivatives are pricing in a 51 basis point increase in the central bank’s benchmark rate by its November meeting. Three-month forward-rate agreements due in eight months fell 2 basis points to 6.0040. Bonds snapped three days of increases, with the 13.5 percent security due September 2015 falling 1.6 cents to 121.462 rand, lifting the yield by less than a basis point to 7.84 percent. President Jacob Zuma delivers his annual State of the Nation address at 7 p.m. in Cape Town today. “While this event traditionally hasn’t introduced completely new policy directives in the past, there is always the outside likelihood,” the Standard Bank analysts wrote. “The rand might also weaken should President Zuma re-emphasize the need for greater export-related job creation, which might imply further reserve accumulation by the South African Reserve Bank and Treasury.” Rising Reserves South African gross reserves climbed 3.7 percent, the most in 10 months, to $45.5 billion in January as the central bank boosted foreign currency purchases and the dollar weakened, boosting the value of holdings in euros, pounds and other currencies. The Reserve Bank has increased purchases after last year’s 11 percent rally versus the dollar, reducing the competitiveness of exports. South Africa’s jobless rate, the highest of 61 countries tracked by Bloomberg, fell to 24 percent in the fourth quarter from 25.3 percent in the previous three month, the statistics agency said on Feb. 8. To contact the reporter on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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