Rand Weakens as South Africa’s Yields Rise on U.S. Shutdown

The rand declined against the dollar and South African bond yields rose as investor appetite for riskier assets waned while U.S. lawmakers wrangled over the nation’s debt ceiling and government shutdown.

The U.S. will exhaust measures to avoid breaching its debt ceiling on Oct. 17. House of Representatives Speaker John Boehner said lawmakers won’t raise the limit without packaging it with other provisions, a position opposed by President Barack Obama. South Africa’s net foreign-currency and gold reserves rose in September in line with estimates, the central bank reported today.

“Markets are focused almost exclusively on the U.S. government shutdown,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “With no progress over the weekend, risk aversion is starting to rise” and weigh on the South African currency, he said.

The rand depreciated 0.4 percent to 10.0305 per dollar as of 12:36 p.m. in Johannesburg, the second-most today after Mexico’s peso among major currencies tracked by Bloomberg. Yields on benchmark 10.5 percent bonds due December 2026 rose three basis points, or 0.03 percentage point, to 8.04 percent.

South Africa’s net reserves increased 0.4 percent last month to $45.75, in line with the $45.8 billion median estimate of five economists in a Bloomberg survey. Gross reserves climbed to $50.02 billion last month from $47.95 billion in August after the National Treasury raised $2 billion in an international bond issue, the Reserve Bank said.

“We continue to find very little evidence of significant outright foreign-exchange intervention activity by the authorities in September,” Jeffrey Schultz, a Johannesburg-based economist at BNP Paribas Cadiz Securities, said in an e-mail.

While the Reserve Bank has been accumulating foreign currency to help protect against swings in the rand, the institution has said it will not attempt to interfere in the level of the currency.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.