South African Rand Gains Most in a Month on Inflation

The rand advanced the most against the dollar in almost a month and South African bonds gained after the inflation rate in the continent’s biggest economy slowed to the lowest since June.

Consumer-price inflation slowed to 5.5 percent last month from 6 percent in September, the government’s statistics agency said today. The median estimate of 23 economists in a Bloomberg survey was 5.7 percent. The South African Reserve Bank will leave its policy rate unchanged at 5 percent tomorrow, according to all 22 analysts surveyed by Bloomberg.

“The CPI figure is bringing some positivity back into the market” after a selloff yesterday on concern that a power shortage will lead to blackouts, Thando Vokwana, a fixed-income trader at FirstRand Ltd., said by phone from Johannesburg. With the market pricing in an unchanged policy rate, “the focus tomorrow will be on whether the Monetary Policy Committee statement shifts from a hawkish tone to a more dovish tone.”

The rand gained 0.9 percent to 10.0955 per dollar by 4:04 p.m. in Johannesburg, the most on a closing basis since Oct. 22. Yields on bonds due December 2026 dropped five basis points, or 0.05 percentage point, to 8.13 percent.

The rand fell the most since Nov. 8 yesterday after Eskom Holdings SOC Ltd., the state-owned electricity company, declared a power emergency and asked its biggest customers to cut back use by at least 10 percent to avoid blackouts.

‘Stand Pat’

The inflation reading, “in combination with further weakness on the growth front, favors a more dovish Reserve Bank tone than was seen previously,” Manisha Morar, a Johannesburg-based analyst at ETM Analytics, said in a report. The central bank “is likely to stand pat on policy given various considerations including the recent breach of the inflation target band, rand volatility and uncertainty regarding if and when the Federal Reserve will taper stimulus.”

Fed Chairman Ben S. Bernanke said yesterday the central bank will probably hold down its target interest rate long after ending $85 billion in monthly bond buying, and possibly after unemployment falls below 6.5 percent.

Foreign investors bought a net 282 million rand ($28 million) of South African bonds yesterday, a third day of inflows, trimming net sales this month to 6.94 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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