Rand Gains to Pare Monthly Drop as Yields Fall on Slowing Credit

The rand gained, paring its worst monthly performance since May, and bond yields fell for the first time in four days after private-sector credit growth slowed more than forecast in July.

Growth in borrowing by households and companies fell for a third month to 7.4 percent, the slowest pace since April 2012, from 8.9 percent in June, the Pretoria-based Reserve Bank said today. The median estimate of 13 economists in a Bloomberg survey was for expansion of 8.6 percent. The data give more evidence of a slowdown in Africa’s biggest economy, limiting the central bank’s room to increase interest rates as consumer prices climb.

“Subdued credit growth suggests that demand-driven inflation remains in check,” Johannes Khosa, an economist at Nedbank Group Ltd. (NED) in Johannesburg, said in an e-mail. “The Monetary Policy Committee will continue to strike a balance between high inflation and the still-poor economic growth outlook by maintaining the current policy stance well into 2014.”

South Africa’s currency appreciated 0.2 percent to 10.3369 per dollar as of 10:48 a.m. in Johannesburg, paring its decline this month to 4.5 percent, the most since a 13 percent slump in May. Yields on benchmark 10.5 percent bonds due December 2026 dropped seven basis points, or 0.07 percentage point, to 8.49 percent, crimping the increase this month to 32 basis points.

The Reserve Bank has left its benchmark repurchase rate at 5 percent since a surprise 50 basis-point cut in July 2012 to support growth. The consumer inflation rate rose to an annual 6.3 percent in July, above the central bank’s 3 percent to 6 percent target range.

South Africa’s monthly trade deficit probably widened to 9 billion rand ($870 million) in July from 7.7 billion rand the month before, a report may show at 2 p.m., according to the median estimate of 11 economists.

Foreign investors sold a net 2.15 billion rand of South African stocks and bonds yesterday, bringing outflows from the nation’s debt and equity markets in the first four days of the week to 5.22 billion rand, according to JSE Ltd. data

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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