The rand declined the most among the world’s major currencies and bonds fell after the South African government unveiled a bailout plan that may strain the nation’s finances.
It sank as much as 2.3 percent, wiping out this year’s gains, to 14.3727 per dollar. The yield on the nation’s debt due 2026 jumped 24 basis points to 9.1 percent.
“The first impression is not so good,” said Cristian Maggio, the London-based head of emerging-market strategy at TD Securities.
“I think the market is shocked with the 69 billion rand bailout for Eskom and the 4.5 percent deficit target next year, but I’m still assessing whether this is enough to trigger a downgrade.”
A cut to South Africa’s credit rating would see government bonds ejected from the World Government Bond Index and the rand would depreciate between 10 percent and 15 percent from current levels, according to Maggio.