The rand depreciated for the third day as investors await guidance from the U.S. Federal Reserve on monetary stimulus, while bonds rose amid bets South Africa’s budget balance swung to a surplus last month.
The Fed’s Open Market Committee, which has said it may start paring stimulus should the U.S. economy meet the central bank’s forecasts, starts a two-day policy meeting today. South Africa posted a budget surplus in June for the first time in three months, a report may show.
“All eyes are on the Fed,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED) in Johannesburg, said by phone. “Any sign that implies they might taper their asset purchases sooner rather than later will” undermine the rand, he said.
The rand depreciated 0.4 percent to 9.8363 per dollar as of 11:11 a.m. in Johannesburg, trimming the gain in July to 0.5 percent. Yields on benchmark 10.5 percent bonds due December 2026 dropped five basis points, or 0.05 percentage point, to 8.17 percent. The yield is up 26 basis points this month.
South Africa’s budget surplus in June was 16.5 billion rand ($1.7 billion), compared with a shortfall of 17.5 billion rand the previous month, the National Treasury may report at 2 p.m. local time, according to the median estimate of four economists in a Bloomberg survey.
“Today’s data should, on the balance, be positive for the market,” Rand Merchant Bank fixed-income analysts Carmen Nel in Cape Town and Mamello Matikinca in Johannesburg said in e-mailed comments. The monthly budget surplus “may bring temporary relief to the local market,” which has encountered “a bit of a demand deficit for government bonds,” they said.
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