Rand Set for Second Weekly Gain After MPC Signals Rate Increase

The rand swung between gains and losses, headed for its second weekly advance, after South Africa’s central bank indicated it may raise borrowing costs as a weaker currency fuels inflation.

The Monetary Policy Committee left the repurchase rate at 5 percent yesterday, matching the forecasts of all 23 economists in a Bloomberg poll. While inflation slowed last month and the central bank lowered its price projections, MPC members spent “considerable time” discussing raising interest rates in the face of inflation threats, Governor Gill Marcus said.

“Governor Marcus iterated time and again in the statement about the continued risks to inflation along with a downward revision in growth, so on balance it was certainly more hawkish than we expected,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by e-mail. The rand may trade between 10.05 and 10.25 per dollar today, he said.

South Africa’s currency advanced less than 0.1 percent to 10.1256 per dollar as of 10:07 a.m. in Johannesburg after gaining as much as 0.1 percent and declining 0.2 percent earlier. The rand is poised for a 0.3 percent appreciation this week. Yields on benchmark bonds due December 2026 dropped five basis points, or 0.05 percentage point, to 8.21 percent, following a 12 basis-point jump yesterday.

Foreign investors sold a net 3.12 billion rand ($308 million) of South African bonds yesterday, the most in a day since May 29, 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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