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South African Rand Weakens to Lowest Level Since October 

South African Rand Weakens to Lowest Level Since October 

(Bloomberg) -- South Africa’s rand weakened past 15 per dollar for the first time since October, extending a decline sparked by the worst quarterly economic contraction in a decade and a ruling-party debate about the mandate of the central bank.

The currency weakened as much as 0.9% to 15.0081 per dollar before paring the decline to trade at 14.9628 by 5:12 p.m. in Johannesburg. A sustained move above 15, the 76.4% Fibonacci retracement level, would set up a move toward the September high of 15.69.

South African Rand Weakens to Lowest Level Since October 

South Africa’s economy contracted 3.2% on an annualized basis in the first quarter amid rolling electricity blackouts and a slump in manufacturing and mining production, data showed this week, the most since a recession in 2009. That sparked a debate about the role of the South African Reserve Bank, with some African National Congress leaders calling for quantitative easing to support growth.

Derivatives traders are boosting bets on interest-rate cuts that may fuel growth, but would weigh on the rand as the country’s widening current-account deficit increases its reliance on foreign purchases of stocks and bonds. Forward-rate agreements are pricing in an 80% chance of a 25 basis point cut next month, and another by year-end.

Fresh jitters in emerging markets following Mexico’s credit downgrade added to investors’ concerns as the trade war continues to sap demand for riskier assets.

To contact the reporter on this story: Colleen Goko in Johannesburg at cgoko2@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Robert Brand, Marton Eder

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