Rand Gains to 5-Week High as Bonds Advance on Summers

(Corrects to say rand rises to five-week high.)

The rand climbed to a five-week high against the dollar after Lawrence Summers withdrew his bid to become Federal Reserve chairman. Bonds gained, driving benchmark yields to the lowest since July.

Summers would tighten Fed policy more than Janet Yellen, who was his main rival to replace Ben S. Bernanke, according to a Bloomberg Global Poll last week. South Africa’s inflation rate probably increased in August, staying above the central bank’s target for a second month, a report may show on Wednesday.

“There is very strong global risk appetite after the announcement that Summers is no longer running,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED), said by phone from Johannesburg. The rand may extend gains, targeting 9.65 per dollar after breaching key technical levels, he said.

South Africa’s currency appreciated as much as 1.8 percent to 9.7496 per dollar, the strongest level since Aug. 9. It traded at 9.7565 as of 1:25 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 dropped 10 basis points, or 0.1 percentage points, to 8.06 percent, the lowest on a closing basis since July 24.

The dollar declined against 15 of the 16 most-traded currencies and emerging-market stocks rose to a three-month high. More than $47 billion left global funds investing in emerging-market bonds and stocks from May through August amid concern that reduced Fed stimulus would erode demand for riskier assets. Fed policy makers are meeting on Sept. 18.

South Africa’s inflation rate probably rose to 6.4 percent in August from 6.3 percent the month before, according to the median estimate of 21 economists in a Bloomberg survey. Rising inflation is limiting the South African Reserve Bank’s room to stimulate the economy. The central bank will leave its key repurchase rate unchanged at 5 percent on Sept. 19, according to all 18 economists surveyed.

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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