S. African Rand Gains as U.S. Durable Goods Cast Stimulus Doubt
The rand gained against the dollar for a third day after U.S. durable-goods orders fell more than forecast in July, casting doubt on Federal Reserve plans to cut monetary stimulus that drove demand for emerging-market assets.
Orders fell for the first month since March, while a report last week showed new home purchases plunged the most in three years. Three regional Fed presidents differed over the timing for reducing bond buying as central bankers met in Jackson Hole, Wyoming from Aug. 22-24. South Africa’s economy probably grew 3.3 percent in the second quarter from 0.9 percent in the prior three months, a report may show tomorrow, according to the median estimate of 18 economists in a Bloomberg survey.
“The durable-goods orders were worse than expected and that helped the rand a little bit,” Ion de Vleeschauwer, Johannesburg-based chief dealer at Bidvest Bank, said by phone. A bank holiday in the U.K. reduced trading in the rand, he said.
The currency gained 0.2 percent to 10.2252 per dollar as of 4:08 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 were unchanged at 8.51 percent.
About $1.4 trillion has been erased from the market value of emerging-market equities since Fed Chairman Ben S. Bernanke said May 22 that policy makers may curb asset purchases. Fed officials in Jackson Hole rebuffed calls to take the threat of fallout in emerging markets into account when tapering stimulus.
Foreign investors sold a net 2.01 billion rand ($197 million) of South African bonds last week, according to JSE Ltd. data.
The U.S. data was enough to reverse an earlier decline of as much as 0.4 percent in the rand. The retreat was prompted by the start of strikes at South Africa’s largest construction companies and its state-owned airline. The protests are extending labor disputes beyond gold mines and carmakers in a country that’s been wracked by labor turmoil since last year, undermining growth.
Labor unrest “can have devastating consequences for exports and diminish foreign investors’ appetite to invest in South Africa,” Bruce Donald, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in a note.
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