Related News:
Rand Weakens From More Than 2 1/2-Year High as Importers Purchase Dollars
The rand weakened for the first time in four trading sessions as importers bought foreign currency at cheaper levels following the rand’s surge to its strongest level against the dollar in more than 2 1/2 years.
South Africa’s currency declined 0.6 percent to 7.2351 before trading 0.3 percent weaker at 7.2179 by 4:50 p.m. in Johannesburg, from a previous close of 7.1953.
“Importers are buying a lot of dollars, which is putting pressure on the rand,” said Jim Bryson, head of foreign- exchange trading at Rand Merchant Bank in Johannesburg.
Earlier today the rand rallied as much as 0.9 percent to 7.1298 per dollar, the strongest since January 2008, as investors bet stronger-than-estimated U.S. payroll data showed the world’s largest economy will avoid a double-dip recession.
Government bonds fell for a third day in South Africa, with the benchmark 13.5 percent security due September 2015 losing 4 cents to 125.77 rand. The yield was little changed at 7.28 percent.
FRAs, or forward-rate agreements, showed traders reduced bets South Africa’s central bank will lower its 6.5 percent benchmark interest rate when it announces its next decision on Sept. 9. The cost of three-month cash contracts due in one month rose 2 basis points to 6.22 percent, five basis points above the lowest closing level since the central bank first introduced its repurchase rate in 1999, reached on Aug. 30.
Rand Strength
South Africa’s rand has rallied more than 30 percent since the start of last year versus the dollar, prompting calls by union and manufacturers to weaken the currency to make the country’s exports more competitive. Even so, the rand’s advance has reduced the cost of imported oil, helping to slow inflation to an almost 4 1/2-year low of 3.7 percent in June.
“The market is discounting a 50 basis-point cut at the next meeting,” said Victor Mphaphuli, a portfolio manager at Stanlib Asset Management in Johannesburg. “The strength of the rand, benign inflation and tepid growth data all give the Reserve Bank room to cut rates.”
Nedbank Group Ltd. and Stanlib have revised their interest rate outlooks and are now predicting a half percentage-point reduction in the key rate next week, following previous predictions that the rate would remain unchanged.
South Africa’s economic growth slowed to an annualized 3.2 percent in the second quarter, from 4.6 percent in the first three months of the year.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
Rate These Stories
Rate this Page