The rand slumped towards its biggest monthly drop in two years after a report that showed the U.S. economy expanded at the fastest quarterly pace in three. The currency of Africa’s biggest economy declined as much as 1.5 percent to 7.1465 per dollar and traded 1 percent weaker at 7.1095 by 4:11 p.m. in Johannesburg, from a previous close of 7.0424. The rand is heading toward a monthly fall of 6.8 percent, the biggest since January 2009. The U.S. economy grew at an annual pace of 3.2 percent in the fourth quarter, falling short of the 3.5 median estimate by 85 economists polled by Bloomberg. That compares with 2.6 percent in the three months through October. Accelerating growth in the world’s biggest economy increases the appeal of the dollar compared with emerging-market currencies. “It sends a signal that the U.S. macro economic recovery continues to be on the way,” Benoit Anne, a London-based head of emerging markets strategy at Societe Generale SA, said today by phone. “The short-term effect is going to be positive dollar, so negative for high-beta currencies that are highly correlated to dollars. The rand is one of them of course.” Gold, which with platinum accounts for about a fifth of South Africa’s exports, headed for a 2.2 percent drop this week, the fourth of declines. “Commodity prices have also been less supportive then they were in the latter part of last year, the gold price in particular,” Nema Ramkhelawan, a Johannesburg-based currency strategist at Rand Merchant Bank, said today by phone. Bonds, Stocks South Africa’s benchmark 13.5 percent government bond due September 2015 fell to the lowest in a week, slipping 34 cents to 121.494 rand. The yield increased 8 basis points to 7.86 percent. Foreign investors have been net sellers of $13 billion of South African bonds this year to date, compared with $2 billion over the same period a year ago, according to data compiled by JSE Ltd., which manages the nation’s stock and bond exchanges. The FTSE/JSE Africa All Share Index dropped the most in five months, losing 1.9 percent to 31,539.95. BHP Billiton Ltd., the world’s biggest mining company, led declines, dropping as much as 3.5 percent to 267.49 rand, the biggest intraday slump since June 29. “This is profit-taking by foreign investors,” Bruce Main, a director at Johannesburg-based Ivy Asset Management, said by phone. “Rand strength is a major issue here. The currency has done well all of last year, so they made money on the currency as well.” Overseas investors were net sellers of South African stocks yesterday and on Jan. 26. Intervention Bets The rand has rallied 40 percent against the dollar in the past two years as near-zero interest rates in developed nations encouraged investors to borrow cheaply and invest in markets offering higher returns. South Africa’s 5.5 percent benchmark interest rate, which compares with deposit returns as low as 0.1 percent in Japan and 0.25 percent in the U.S., makes the country a popular beneficiary in this strategy, known by traders as the carry trade. The rally prompted manufacturers and the Congress of South African Trade Unions to call for measures to weaken the rand, which they say is hurting economic growth and job creation. The rand’s decline this month is because “we have a lot more speculation of South African Reserve Bank intervention in the form of more than just reserve accumulation,” Rand Merchant Bank’s Ramkhelawan said. “The SARB will be very late to the party compared to other emerging markets in stemming currency appreciation. We’ve seen a bit more official talk about alternative mechanisms and that’s why we’ve seen a bit of pressure on the rand.” South Korea, Brazil and Turkey are among emerging markets in striving to counter capital inflows driving currency appreciation. South Korea has revived taxes on overseas investors in domestic government bonds and tightened scrutiny of trading in foreign-currency derivatives. To contact the reporter on this story: Chris Kay in London at ckay5@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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