Brazil’s Real Hammers South Africa’s Rand in Commodities Play

(Bloomberg) -- South Africa’s rand has slumped to its weakest level in 22 months against Brazil’s real as agricultural commodities move into the forefront of the raw-materials boom.

The real is this year’s best-performing major emerging-market currency, and has proved resilient during this week’s selloff stoked by an increasingly hawkish Federal Reserve. By contrast, the rand has almost wiped out the year’s gains in one week.

South Africa’s currency has retreated 8.2% against the real this week and is down 18% versus the Brazilian unit this year.

While the rise in prices of metals and minerals buoyed the rand during the first quarter, Brazil is benefiting more from supply disruptions that have elevated agricultural commodities, according to Robert Hoodles, a London-based analyst at InTouch Capital.

“Depending on South Africa as a commodity producer and the more positive trend in the balance of payments for rand support has proved a trap,” Hoodles said. “Agri-commodity is favored over minerals right now, and this can be seen in the huge move in BRLZAR.”

The rand declined 1.2% against the dollar on Friday, bringing its losses this week to 6%. The real is up 1.7% for the week and 21% this year. 

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