The rand weakened for a fifth day, the longest losing streak in three months, and bond yields rose to a one-month-high on speculation the U.S. Federal Reserve will delay more monetary stimulus that would debase the dollar.
The South African currency retreated as much as 0.4 percent and traded 0.2 percent weaker at 8.2090 per dollar as of 3:57 p.m. in Johannesburg, bringing its decline in the past five days to 1.5 percent. Yields on 6.75 percent bonds due 2021 climbed seven basis points, or 0.07 percentage point, to 6.91 percent, set for the highest since July 13.
Stronger U.S. economic data have reduced the probability that the Fed will announced a third round of bond-buying, known as quantitative easing, at its policy meeting next month, Goldman Sachs Group Inc. said in a report. Industrial production in the U.S. increased more than economists’ estimates in July, a report showed today. Data yesterday showed American retail sales grew more than forecast last month.
“The U.S. data has been reassuring,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., said by phone. “There’s not going to be promises of further liquidity injection into the market for some time.”
The dollar gained against the euro and stocks and metal prices declined. South Africa’s benchmark stock index fell as shares in commodity producers including Anglo American Plc and BHP Billiton Ltd. tumbled.
The rand stayed weaker after data showed South African retail sales rose at the fastest pace in six months in June, reducing chances the central bank will cut its benchmark rate for a second time.
Sales growth accelerated to 8.3 percent from a revised 7.1 percent in May, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 11 economists was 4.7 percent. Sales rose 1.9 percent from a month earlier.
“Persistent shifts in domestic interest rate expectations will continue to aggravate volatility in the local currency market,” Bruce Donald, a currency strategist at Johannesburg- based Standard Bank Group Ltd., wrote in e-mailed comments.
The South African Reserve Bank cut its benchmark interest rate by 50 basis points to 5 percent on July 19, citing the slowing global economy. The Monetary Policy Committee meets starting Sept. 18 to assess borrowing costs.
Forward-rate agreements, used to speculate on interest rates, are pricing in less than a 35 percent chance of a rate cut within the next six months, Donald wrote. Three weeks ago, the contracts implied a 70 percent chance of a cut. Standard Bank expects the central bank to leave its repo rate unchanged in this period.
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