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South Africa's rand falls to 2-year low as Turkey rout spreads
* Rand slides 10 percent before paring losses
* Yields on government bonds spike
* Johannesburg-listed stocks mostly spared pain
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By Olivia Kumwenda-Mtambo and Alexander Winning
JOHANNESBURG, Aug 13 (Reuters) - South Africa's rand plunged
more than 10 percent to a 2-year low against the dollar early on
Monday and government bonds weakened sharply as a renewed rout
in the Turkish lira spread to other emerging markets.
The rand, which later recovered to trade down 1.6
percent against the U.S. unit by 1500 GMT, is one of the most
deeply traded emerging market currencies, making it susceptible
to swings in sentiment on global markets.
The magnitude of the rand's slide came after three days of
heavy losses and caught the South African Reserve Bank by
surprise, but a deputy governor at the bank told Reuters that
the regulator was "nowhere near" intervening to support the
Highlighting South Africa's narrower current account deficit
and smaller stock of short-term external debt than Turkey,
analysts said investors should not be overly concerned by recent
"The rand is currently telling us a lot more about general
emerging market sentiment than it is about South Africa in
particular," said John Ashbourne of Capital Economics.
"The rand is likely to rebound in the short term as the
situation in Turkey stabilises," Ashbourne added.
The yield on South Africa's benchmark government bond
maturing in 2026 rose 19.5 basis points to 9.050
percent, reflecting weaker bond prices.
The average yield premium to hold South
African debt over safe haven U.S. Treasuries rose to 303 basis
points (bps), having added more than 30 bps in the past week.
The lira has lost more than 40 percent of its value this
year on worries over Turkish President Tayyip Erdogan's
increasing control over the economy and deteriorating relations
with the United States.
It did find a sliver of support on Monday, when Turkey's
central bank said it would take all measures necessary to
maintain financial stability.
"The Turkey crisis was caused by monetary policy reacting in
a completely unsuitable manner. Countries with a decent monetary
policy should be in a better position," Commerzbank analysts
wrote in a research note, referring to South Africa.
"The recovery of the rand ... confirms that at least some
market participants have trust in the (South African Reserve
Bank) to react appropriately."
Johannesburg-listed stocks were mostly spared the pain felt
elsewhere in South African assets.
The All-share index closed up 0.32 percent at
57,885 points, while the Top-40 index ended 0.47
percent higher at 51,821 points.
One outlier was South African pulp and paper maker Sappi
, however. Its shares fell 9.5 percent after the company
reported a 12 percent drop in quarterly profit.
(Additional reporting by Karin Strohecker in London
Editing by James Macharia and Alison Williams)
First Published: 2018-08-13 08:27:07
Updated 2018-08-13 17:58:13
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